The Securities and Exchange Board of India (SebiI) has ordered a full-scale investigation and inspection of the books of audit firm Price Waterhouse to ascertain if it was involved in manipulating the financial data of Satyam Computer Services.
The probe may extend into investigating the role of merchant bankers to the American Depository Shares (ADS) issued by the company in May 2001 which coincides with the eight years during which the data was fudged, official sources said.
The investigations are independent of the probe ordered by the ministry of corporate affairs through the Institute of Chartered Accountants of India (ICAI).
“What we will be looking at is its involvement in (supporting) misleading information and thus the market at large since this forms the basis of analysis. It will also be probed if the audit firm has colluded with the company in making disclosures on company data to the market participants like stock exchanges,” a source said.
They added that the role of merchant bankers for ADR — DSP Merrill Lynch and Bank of America, among others — is under scanner since the ADRs were listed on May 16, 2001 on the New York stock Exchange. It is suspected that the same manipulated data may have been used for influencing the market entities in United States, besides India. Sebi will be co-ordinating with the Securities Exchange Commission, the market regulator for the US, as per the memorandum of understanding signed between the two countries.
ICAI as a regulator has a very lengthy process of fact-finding and investigation, while the issue has needs to be dealt with immediately as it involves the wider interest of the market. Moreover, the role of chartered accountants and their firms has become crucial in the day-to-day affairs of the companies since the firms and the auditors influence a lot of legal procedures through lobbying or write-ups, sources said.
“Therefore, the body needs to be regulated more stringently. Apart from the company affairs ministry and ICAI, the firms and the auditors need to be regulated by the regulatory agencies related to the sectors under which the companies they audit fall,” said a source.