The committee set up by the accounting regulator, the Institute of Chartered Accountants of India (ICAI) to look into accounting loopholes exploited by the fraud-hit Satyam Computer to swindle investor money, has recommended action to be taken against Price Waterhouse and its auditors for disclosing information to an authorised audit firm Lovelock & Lewes.

The findings of the committee, headed by former president of ICAI Uttam Prakash Agarwal, states that though the statutory auditors of Satyam Computers was Price Waterhouse, however, in reality the audits were conducted by Lovelock & Lewes, thereby breaching the mandatory confidentiality clause that every practising chartered accountant needs to follow under the Chartered Accountants Act, 1949.

The report has found such a practice to be surrogate in nature and has put the matter in front of the general council of the institute that is slated to meet next month to take a final call on the committee findings.

According to the clause (1) of Part I of the Second Schedule to the Chartered Accountants Act, 1949, which deals with professional misconduct in relation to chartered accountants in practice, states that it would be considered a professional misconduct if company information acquired during accounting practice is passed on to an unauthorised firm without the consent of the company.

The finding of this surrogate practice was based on the supplementary charge sheet filed by the Central Bureau of Investigation (CBI) on November 22, 2009. it is observed that the audit of M/s Satyam was carried out by the audit firm, M/s Lovelock & Lewes and not by M/s Price Waterhouse. This indicates surrogate practice, the report finding states.

The report states that by doing so the company (read Price Waterhouse) has breached the aforesaid clause. FE has a copy of the high-powered committee report.

Based on the findings the committee has recommended that the general council of the institute consider action needed to be taken against the audit firm of M/s Satyam. Based on the enquires conducted by the committee, it has found that the nature of the benefits accrued through such surrogate practices is to bring business for Indian CA firms.