One of the most unprecedented order in the country “Price Waterhouse banned from auditing listed firms for 2 years”
Overview of the SEBI Order:
On January 10, 2018, SEBI took the unprecedented step of banning all 11 Price Waterhouse (PW) firms in India from issuing audit and compliance certificates for listed companies and intermediaries for two years. This decision was coupled with a SEBI audit penalty of Rs. 13 crores, including 12% interest on the wrongful gains made by Price Waterhouse and its partners S. Gopalakrishnan and Srinivas Talluri.
Few findings from the investigation carried out by SEBI in Satyam Computers Services Limited (SCSL) wherein “systemic problem” in the audit processes were noted, have been excerpted below:
Inflated Cash/Bank Balances of Rs. 5,040 Crores
- The auditors failed to independently verify the bank statements and fixed deposits.
- They also did not maintain necessary control over the process of sending and receiving balance confirmations from banks. This was in complete disregard of the Auditing and Assurance Standards (AAS) prescribed by ICAI.
- Moreover, they relied on the balance confirmations from SCSL, which had glaring anomalies and huge discrepancies, without further inquiry or examination. This led to the misreporting of account balances.
Inflated Sales Revenues Using 7,588 Fake Invoices
- The auditors failed to verify invoices, which resulted in inflated sales revenues by accounting for 7,561 fake invoices and 27 invoices linked to non-existent customers.
Overstated Debtors’ Position by Rs. 490 Crores
- The auditors did not seek external confirmation from the debtors. This was a violation of their own audit manual and provisions in AAS.
Firmway’s Role in Preventing Similar Issues
SEBI’s order came into effect immediately, but for operational ease, it did not impact audit assignments for FY 2017-18. Price Waterhouse has since expressed confidence in obtaining a stay on the SEBI order.
However, this case has sent a clear message from SEBI: wrong practices and market abuse will not be tolerated in India.
At Firmway, we believe in supporting auditors to comply with auditing standards. External confirmations are a powerful and reliable audit tool that provides more reliable audit evidence. Over the past two years, we have developed a robust, high-quality Audit Confirmation Tool that helps auditors obtain direct confirmations from the parties involved. Additionally, to help identify fake entities, we offer a verification service to ensure that the entities involved are legitimate.
To learn more about our services and how we can help you maintain audit compliance and prevent penalties, please visit firmway.in.
One of the most unprecedented order in the country “Price Waterhouse banned from auditing listed firms for 2 years”
Overview of the SEBI Order:
On January 10, 2018, SEBI took the unprecedented step of banning all 11 Price Waterhouse (PW) firms in India from issuing audit and compliance certificates for listed companies and intermediaries for two years. This decision was coupled with a SEBI audit penalty of Rs. 13 crores, including 12% interest on the wrongful gains made by Price Waterhouse and its partners S. Gopalakrishnan and Srinivas Talluri.
Few findings from the investigation carried out by SEBI in Satyam Computers Services Limited (SCSL) wherein “systemic problem” in the audit processes were noted, have been excerpted below:
Inflated Cash/Bank Balances of Rs. 5,040 Crores
- The auditors failed to independently verify the bank statements and fixed deposits.
- They also did not maintain necessary control over the process of sending and receiving balance confirmations from banks. This was in complete disregard of the Auditing and Assurance Standards (AAS) prescribed by ICAI.
- Moreover, they relied on the balance confirmations from SCSL, which had glaring anomalies and huge discrepancies, without further inquiry or examination. This led to the misreporting of account balances.
Inflated Sales Revenues Using 7,588 Fake Invoices
- The auditors failed to verify invoices, which resulted in inflated sales revenues by accounting for 7,561 fake invoices and 27 invoices linked to non-existent customers.
Overstated Debtors’ Position by Rs. 490 Crores
- The auditors did not seek external confirmation from the debtors. This was a violation of their own audit manual and provisions in AAS.
Firmway’s Role in Preventing Similar Issues
Firmway’s Role in Preventing Similar IssuesSEBI’s order came into effect immediately, but for operational ease, it did not impact audit assignments for FY 2017-18. Price Waterhouse has since expressed confidence in obtaining a stay on the SEBI order.
However, this case has sent a clear message from SEBI: wrong practices and market abuse will not be tolerated in India.
At Firmway, we believe in supporting auditors to comply with auditing standards. External confirmations are a powerful and reliable audit tool that provides more reliable audit evidence. Over the past two years, we have developed a robust, high-quality Audit Confirmation Tool that helps auditors obtain direct confirmations from the parties involved. Additionally, to help identify fake entities, we offer a verification service to ensure that the entities involved are legitimate.
To learn more about our services and how we can help you maintain audit compliance and prevent penalties, please visit firmway.in.
