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ICAI probe finds Pricewaterhouse auditors guilty in Satyam accounting scam
September, 29th 2009

The Institute of Chartered Accountants of India or ICAI has found two former partners of audit firm Pricewaterhouse guilty of professional misconduct in connection with the $1.5 billion accounting fraud committed by the former founder and Chairman Ramalinga Raju of Indian IT outsourcer Satyam Computer Services.

In an announcement made on Monday, ICAI President Uttam Prakash Agarwal said that the disciplinary committee of the apex body of chartered accountants have found S. Gopalakrishnan, Srinivas Talluri "prima facie" guilty of professional misconduct. Gopalakrishnan and Talluri had signed the balance sheets of Satyam.

The committee also found that two other auditors - P. Shiva Prasad and C.H. Ravindranath - of Pricewaterhouse, who were part of the audit team for Satyam, were guilty of professional misconduct. All four work for Pricewaterhouse, Bangalore.

According to Agarwal, these four were responsible for ensuring that Satyam's financial statements were correct and true but had failed to carry out their professional duty.

The committee has also found Satyam's former CFO Srinivas Vadlamani aand senior vice president of internet audit cell V.S. Prabhakara guilty of professional misconduct.

Price Waterhouse, Kolkata and Price Waterhouse, New Delhi, have also been found guilty of not responding to certain queries raised by the ICAI disciplinary committee.

The finding of the ICAI comes nearly nine months after Raju admitted to having fudged Satyam's account books to the tune of at least $1.5 billion by falsifying assets and inflating profits. Pricewaterhouse acted as Satyam's statutory auditor since 2002. The accounting fraud, the biggest in India's corporate history, brought into question the very survival of Satyam, which subsequently was sold off to Tech Mahindra, part of $6.7 billion Mahindra Group, by the Indian government in an open auction.

Since then Satyam has been renamed as Mahindra Satyam whose newly appointed board decided to terminate the company's relationship with Pricewaterhouse.

ICAI's probe is part of a multi-prong probe being carried out by the government to bring the guilty to justice.

The institute will issue notices to all the respondents on Tuesday and seek written replies within 30 days, Agarwal said. According to the rules of the ICAI, the institute can reprimand the members for their misconduct, debar them from membership or impose penalty. The final view is yet to be taken by the ICAI, which will wait for the views from the respondents. Although ICAI is only responsible for chartered accountants, the institute has also sought a wider role from the government in a bid to take action against the accounting firm.

Gopalakrishnan and Talluri, who have stepped down as partners of the audit firm, and Vadlamani, are currently in judicial custody.

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