Bangalore: The statement given last week by Ramesh Rajan, Chairman and CEO, PricewaterhouseCoopers India, to the Central Bureau of Investigation (CBI) has raised more doubts over the firm's involvement in the Satyam financial scam. Earlier they had admitted that Satyam's audit was not done by Price Waterhouse (PW) and that S Gopalakrishnan and Srinivas Talluri were in no way attached to the firm PwC. The firm, however, on Wednesday accepted auditing the Satyam accounts, denying Lovelock & Lewes role in the same.

Pricewaterhouse Coopers Bangalore unit audited the accounts of scam-hit Satyam Computers, as the company is now cooperating with a probe by SEBI, thus repressing the reports stating that it is distancing itself from the accounting fraud.

Earlier, it was reported that accounts of scam-hit Satyam were audited by firm Lovelock & Lewis on behalf of PwC., pointing out Price Waterhouse coming out clean, while Lovelock Lewis might have to face the charges in the case.

"We have been engaged in discussions with SEBI, and will continue to cooperate with its ongoing inquiry," PwC said.

PwC informed that it is unaware of the proposals towards facing a ban on auditing listed Indian firm with SEBI reaching any conclusions with respect to investigation into Satyam.

Chartered accountants are asking why the CEO never issued such statements on earlier occasions, when balance sheets of several listed companies were signed under the name of PW, by partners of Lovelock & Lewes.

Including Gopalakrishnan and Talluri, this list includes the names of P Ramakrishna, Sharmila A Karve, Anuradha Tuli and Kaushik Dutta. These six people also do audits for GMR, Lanco, Saint Gobain, Moser Baer India Limited, Rain Commodities Limited, Infoedge and Satyam.

The balance sheets of these companies for 2007 and 2008 clearly states that the firm’s share holders had formally appointed PwC as its statutory auditor. The books have, however, been signed by either of these auditors who are not partners with PwC but Lovelock & Lewes.

"How is it that PW never made an issue of this then? The only explanation perhaps is that the firm was also receiving certain benefits from these auditors and, hence, chose to keep quiet," asked a chartered accountant. But this is not the only trap PwC is caught in.

PwC can at any point be pulled up under the Companies Act of 1956, considering that the firm did not refute this partnership by estoppels (or presumption), as called in auditing parlance with the six auditors.

Section 11 of Companies Act of 1956 clearly states, "No company, association or partnership consisting of more than 20 persons shall be formed for the purpose of carrying out any other business (apart from banking)."

However, adding these six to the list of existing partners of PwC, the number exceeds this figure.
A Chartered Accountant said on this, "There are two firms by the name PwC in India. The one with head office in Kolkata has 20 partners and the other with head office in New Delhi has 18 partners (as per ICAI records, also available to TOI). Now, if we add these six auditors to any of these firms the number will be more than 20."

"This in turn declares the two PW firms as unregistered companies according to the Act and, hence, under Section 226 of the same Act, does not authorize any of its partners to audit the books of any company," said sources further adding, "In that case the audits conducted by these partners so far stand invalid."
CAs and other auditors in the country say that the firm is also punishable for this under various sections of the Companies Act.