On Wednesday, SEBI banned PwC and all its audit firms from auditing any listed company in India for two years, after finding it guilty in the Satyam scam. ThePrint asks:
Is SEBI’s ban on PwC over the Satyam scandal well deserved or too little too late?
Banning PwC seems an overreaction, will create a big vacuum
Managing partner of Hariani & Co., Advocates and Solicitors
There are a number of ways of looking at SEBI’s decision.
The whole issue has happened because of Satyam. It happened because two partners of PwC were either negligent, or in cahoots with the management of Satyam.
The question remains — was PwC, as an organisation, involved in entirety in the scam? In my view, it wasn’t. Either a couple of partners were negligent or conspired with the management.
Yes, the issue shows that there was a lack diligence on the part of PwC partners. They relied on bank certificates given by the management. The certificates were genuine, but were dated, and within the say, one-month period, the management had encashed the deposits. As of the date of the report, the deposits had disappeared.
Now, it is possible the partners were led astray by the management and they had acted in good faith.
Banning PwC from auditing listed companies for two years seems to be a bit of an overreaction.
The amount of time SEBI has taken to arrive at a decision is a separate issue altogether. The process could have been expedited, but everyone had to be heard.
The result of the proceeding could have been a monetary penalty. PwC today is one of the Big Four. There are only about six big accounting multi-national corporations — Deloitte, Ernst and Young, KPMG, PwC, BDO and Grant Thornton.
Banning PwC will create a big vacuum. All parts of PwC are banned from doing any audits. This will have grave implications on many listed companies. It’s like throwing out the baby with the bath water.
In the United States, when ENRON went bankrupt, the issue regarding Arthur Andersen was a much wider issue. There was a systemic fraud covering several offices.
When it comes to Satyam, there was no systemic widespread issue covering several offices of the PwC organisation.
There will obviously be an appeal against this judgment. I believe PwC will challenge the ban, but may agree to a fine or penalty.
Auditors ignore several issues for fear of losing the account, so it’s a welcome step
Founder-Chairman of Prime Database
It is a welcome step that will act as deterrent and increase accountability in auditing. It may be a late action, but it is better late than never.
Compiled by Deeksha Bhardwaj