Post Sebi ban, PwC clients looking for new auditors

PwC has a marquee client list in India which includes Tata Steel, Hindalco, United Spirits, Ashok Leyland, IndusInd Bank and Colgate.

Indian companies are working on appointing new auditors in their next board meetings to replace auditing firm Price Waterhouse (PW), which has been banned by market regulator the Securities and Exchange Board of India (Sebi) for two years, from April this year, for its role in the Satyam scam.

The firm’s chairman in India, Shyamal Mukherjee, meanwhile, wrote to all clients on Thursday, re-iterating that it would appeal against the decision and expects a positive outcome.

PW’s clients said they would wait for the next few weeks as the auditing firm would complete the audit till March 2018 and, at the same time, would look at putting Plan B in place.

“Price Waterhouse is allowed to audit till March 2018. We had auditors before them and there will be auditors after them,” Romesh Sobti, managing director and chief executive officer (MD & CEO) of IndusInd Bank, said.

The decision to appoint a new auditor would be placed in the next board meeting, said the CEO of a leading manufacturing company who did not wish to be named.

Once the board clears the appointment of a new auditor, the proposal will then go to the shareholders, who will have to clear the appointment.

Dilip Piramal, chairman and managing director of VIP Industries, who had appointed PW two years ago, said he has no choice now but to start scouting around for new auditors.

"The (Sebi) judgment is a well-deserved one given the gravity of collusion between auditors and the CEO/promoters in the Satyam accounting scam," Piramal said.

“Don't forget that the Satyam scam was one of the largest of its kind in Indian business.”

PW has a marquee client list in India which includes Tata Steel, Hindalco, United Spirits, Ashok Leyland, IndusInd Bank and Colgate. A Hindalco spokesperson declined to comment but an insider said the board would discuss this issue at the next meeting.

Some CEOs said Sebi's order came too late in the day.

"The judgment, whether fair or not, has come ridiculously late for something that happened almost a decade ago," said Harsh Mariwala, chairman of consumer products maker Marico.

The company changed from PW to KPMG associate firm BSR because of the stipulation in place by the new Companies Act, he said.

Under the new law, auditors must be rotated every 10 years.

Kamal Baheti, chief financial officer, McLeod Russel, the largest tea producer in India, said they too had switched to Deloitte because of the rotation rule.

"I've been dealing with PW for three decades and never had a problem with them but if they were our auditor presently, we'd go ahead and change," Baheti said.

The order seems to have come very late, in 2018 for something that was done in 2009, he too felt.

Meanwhile, in a letter to his clients, Mukherjee said since the disclosure of the unprecedented management-led fraud in 2009 in Satyam, there have been regulatory investigations in India and the US.

"After nine long years, Sebi has finally concluded its investigation in the Satyam matter. The order also does not apply to any of our other businesses - be it advisory, tax, risk assurance or audit of unlisted entities,” he said.

“PW audit firms will be appealing this decision and believe that there are strong grounds to get a positive outcome," he said while asking for clients’ support.

Interestingly, this is not PW’s first brush with controversy in India.

The firm was singed when Vijay Mallya, chairman of UB Group, fought over allegations of cooked books of United Spirits during his tenure, when the auditor was PW and the “independent investigator” appointed by Diageo to investigate accounts was PW’s UK unit.

A United Spirits spokesperson declined to comment.

(With inputs from Nikhat Hetavkar)

The Satyam Fiasco: Complete Coverage

Photograph: Reuters