The Securities Appellate Tribunal on Thursday allowed audit firm Price Waterhouse and its networking entities in India to continue servicing existing clients in respect of their financial audits up to March 31, 2019 or till a newly constituted bench takes a final decision on the case, whichever is earlier.
The SAT at present comprises of three members. However, one of the members, Jog Singh, will be resigning this month, while presiding officer JV Devadhar has already recused himself from hearing this matter. As a result, once Jog Singh ceases to a member, there would be only one member to hear the appeal, which is not permitted under the law.
The appeal stems from a Jan. 10 SEBI order prohibiting PW entities, from, among others things, directly or indirectly issuing audit certificates to listed companies for two years.
The Securities and Exchange Board of India found that 2 PW entities failed in their duty as auditors of Satyam Computer Services Ltd. The information technology company witnessed an accounting fraud involving over Rs 7,000 crore in misstated financials.
...there has been a total abdication by the auditors of their duty to follow the minimum standards of diligence and care expected from a statutory auditor, which compels me to draw an inference of malafide and involvement on their part.SEBI Order On Jan. 10
The SEBI order barred all 11 PW accounting firms in India from issuing audit certificates and compliance certificates for listed companies and intermediaries for two years. It also ordered the disgorgement of Rs 27 crore in wrongful gains by two PW partners and PW Bangalore.
While the order came into force with immediate effect, SEBI stated that it would not impact PW audit assignments for financial year 2017-18.
PW firms have since challenged SEBI’s order before the SAT and have argued that all entities holding the ‘Price Waterhouse’ name should not be punished as they were not connected to or related to alleged violations committed by Price Waterhouse, Bangalore in the Satyam case.
On Jan. 19, the SAT rejected PW’s plea to stay SEBI’s order but clarified that the SEBI order of Jan. 10 will not affect audit assignments already undertaken by PW entities, whether pertaining to financial year ending Dec. 31, 2017 or financial year ending March 31, 2018.
The SAT decision on Feb. 15 will give PW entities at least one more year of relief.