PWC functioning under SC scanner

The functioning of UK-based multinational accounting firm PricewaterhouseCoopers (PwC) Pvt Ltd and its network audit firms in India came under judicial scrutiny with the Supreme Court agreeing to hear a petition for a probe against them for allegedly indulging in financial irregularities and fudging of accounts.

A bench headed by Chief Justice P Sathasivam said the issues raised in the plea need "examination" and issued notice to the Centre, RBI, Central Board of Direct Taxes (CBDT), the Institute of Chartered Accountants of India (ICAI), PwC and the audit firms sharing its brand name.

The court passed the order on a PIL filed by NGO, Centre for Public Interest Litigation (CPIL), which alleged that these firms, including PwC, that are providing audit, tax and advisory services, "are apparently indulging in activities in violation of various statutes and polices like evasion of income tax, violations of Foreign Direct Investment (FDI) policy, RBI guideline, Foreign Exchange Management Act (FEMA) and other rules..."

The NGO has contended that the huge inflow of funds in violation of FDI policy as well as RBI and FEMA rules "raises serious apprehensions about the end use" of the money.

In its petition, CPIL has contended that the alleged violations of rules and regulations by PwC and its various network audit firm in India have been in public domain for more than one year, yet "relevant authorities have failed to do any investigation into these allegations/reports and take required action".

Apart from a probe into the functioning of these firms, the PIL seeks "directions to lay down guidelines and bring systematic changes in order to check these kinds of accounting scams".

The NGO has contended that payments worth hundreds of crore of rupees, by way of subsidies, export incentives, grants, etc, are done based on certification of the auditors and, "it is, therefore, imperative their certification is absolutely correct and sacrosanct as otherwise it would cause humongous loss to public exchequer."

The NGO in its petition also alleged that PwC and the firms sharing its brand name are also involved in auditing of government and international contracts running into lakhs of crore of rupees and some of their important clients include Ministry of Defence, Ministry of Environment, Indian Oil Corporation, Delhi Jal Board, etc.

Referring to the the 2009 Satyam scam, wherein the company's account had been falsified, the NGO contended that one of PwC's network audit firms, Price Waterhouse Bangalore, was the auditor of the erstwhile Satyam Computer Services Ltd for more than eight years and it had failed to discover the fudging of accounts.

"The trial in the Satyam matter is still on in India but the US Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB), vide their respective orders had imposed civil money penalty aggregating to USD 7.5 million and various other sanctions on respondents 7 to 10 (some of PwC's network audit firms)," the petition said.