Satyam scam: Price Waterhouse seeks ruling on SEBI's jurisdiction over auditors
June, 15th 2010
The Securities and Exchange Board of India may have to establish its regulatory jurisdiction over audit firms before pronouncing its verdict on the case relating to Price Waterhouse's role in the multi-crore Satyam fraud.
This is because Price Waterhouse, which is being probed by SEBI, is understood to have sought a ruling on the regulator's jurisdiction over auditors, before going to the merit of the case. It is learnt that the audit firm, which has been charged with overlooking manipulations of Satyam accounts, has questioned SEBI's jurisdiction on the ground that audit firms are not market intermediaries regulated by it. Audit firms are registered with the Institute of Chartered Accountants of India and are accountable to it for any professional misconduct.
During the hearing last week, counsel of Price Waterhouse urged that the case may be dropped for want of jurisdiction. SEBI is understood to be of the view that it has the jurisdiction to take action against Price Waterhouse, if it is found guilty, as actions of auditors directly or indirectly impact the stock market. SEBI had issued a show-cause notice to auditors of Satyam last year under the Fraudulent and Unfair Practices Regulations. Partners of the Hyderabad arm of the audit firm were allegedly involved in falsification of accounts of Satyam Computers, renamed Mahindra Satyam after the company was taken over by Tech Mahindra.
Earlier, SEBI had rejected Price Waterhouse's application for consent settlement. According to legal experts, if SEBI comes out with a ruling on its regulatory jurisdiction over auditors, it could be immediately challenged by the audit firm. This would further delay the case.