The CA Institute has shot off letters to various India-based PwC affiliates seeking information on their reported settlement with the US Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) over erstwhile Satyam Computers audit failures.

This suo motu action has been taken by the CA Institute's disciplinary committee based on the publicly available information on US SEC's sanction against five PwC India affiliates and their agreement to settle the charges through penalty payment of $6 million, sources in the CA Institute said.

The $6-million penalty is the largest ever imposed on a foreign-based accounting firm in a SEC enforcement action.

The US SEC had last week sanctioned five India-based affiliates of PwC for repeatedly conducting deficient audits of erstwhile Satyam Computer Services and enabling a massive accounting fraud to go undetected for several years.

Larger control failure

The SEC found that the audit failures by the PW India affiliates — Lovelock & Lewes, Price Waterhouse Bangalore, Price Waterhouse & Co, Bangalore, Price Waterhouse Calcutta, and Price Waterhouse & Co, Calcutta — were not limited to Satyam, but rather indicative of a much larger quality control failure throughout PW India.

In a related proceeding before the US-based PCAOB, Lovelock & Lewes and Price Waterhouse Bangalore had agreed to pay the PCAOB a $1.5-million penalty for their violations of PCAOB rules and standards in relation to the Satyam audit engagement.

Both these developments are now under the scanner of the Indian accounting profession regulator —Institute of Chartered Accountants of India.

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