SAT quashes SEBI’s order of 2 year audit ban on Price Waterhouse Coopers (PwC)

The Securities Appellate Tribunal (SAT) reversed the order passed by markets regulator Securities and Exchange Board of India (SEBI) banning Price Waterhouse Coopers from auditing any listed company for two years for its role in the Rs. 7,800-crore Satyam scam. However, SAT partly allowed disgorgement of the Rs.13 crore fee from the auditor.

SAT ruled that SEBI did not have jurisdiction of banning any audit firm as that was the sole prerogative of Institute of Chartered Accountants of India (ICAI). It also ruled that fraud cannot be proved on the basis of negligence in auditing. According to SAT, “SEBI has no authority to look into the quality of audit and auditing services. SEBI can only take remedial and preventative action. The direction issued is neither remedial nor preventive. But punitive.”

SAT ruled that SEBI should not “encroach” upon territories of other regulators or industry bodies like ICAI.

SEBI had banned PwC network firms from auditing listed companies for two years in January 2018. The order was challenged by PwC in SAT.

PwC was the auditor of Satyam Computer Systems when chairman B Ramalinga Raju publicly admitted to large-scale financial manipulations to the tune of over Rs. 5000 crore in the company’s books in 2009. However, a SEBI probe found the scam was much higher at Rs. 7,800 crore.

Later, the Government superseded the Satyam Board and initiated a sale process, which resulted in TechMahindra taking over the company.