The Supreme Court on Friday decided to look into the alleged massive bungling by accounting firm PricewaterhouseCoopers (PwC) and its network audit firms in India.
It has sought reply from the finance ministry, RBI, enforcement directorate and a dozen major chartered accounting firms on a PIL demanding a probe against them for allegedly indulging in financial irregularities, fudging of accounts, massive tax evasion, violation of FDI rules and RBI guidelines and the Foreign Exchange Management Act.
A bench headed by Chief Justice P Sathasivam said the issues raised by an NGO, Centre for Public Interest Litigation (CPIL), need to be ?examined? while seeking explanation from various other parties including the registrar of companies, Central Board of Direct Taxes (CBDT), the Institute of Chartered Accountants of India (ICAI), PwC and the audit firms sharing its brand name.
The PIL filed by CPIL also sought a direction to the government to lay down guidelines and bring systematic changes in order to check these kinds of accounting scams. Counsel Prashant Bhushan, appearing for CPIL, said 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.
The NGO argued 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?.
It stated that payments worth hundreds of crore of rupees, by way of subsidies, export incentives, grants 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 PIL also alleged that PwC and the firms sharing its brand name are also involved in auditing of the government and international contracts running into lakhs of crore of rupees and some of their important clients include the defence, environment ministries, Indian Oil Corporation, Delhi Jal Board.
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 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), via their respective orders had imposed civil money penalty aggregating to $7.5 million and various other sanctions on respondents 7 to 10 (some of PwC’s network audit firms),? the petition said.
The alleged financial irregularities and violations of extant regulations by Pwc India include ?inflow of approximately Rs 240 crore, apparently from overseas, in various Pwc India entities in FY 10 and FY 11 without disclosing sources thereof in violations of FDI policies, RBI guidelines, and other rules and regulations and not reflecting them correctly in their books of accounts; unexplained credits of approximately Rs 41 crore in the audit firm, Price Waterhouse & Co. Kolkata, apparently to acquire another audit firm Dalal & Shah, Mumbai, through a circuitous route by giving interest free loans of the exact amount to its four partners and further allowing them to invest the said exact amount in Dalal & Shah, Mumbai in violations of the FDI policy, RBI guidelines, FEMA and regulations there under and ICAI regulations and also resulting in evasion of income tax.?
?Wrong accounting on account of payment of the insurance premium by only three firms of Pwc India while the benefit of the said policy was enjoyed even by other member firms who did not pay any premium in violation of Companies Act, 1956 which also exposes their claims before various authorities of them being separate legal entities,? the PIL stated.
