Satyam accounting fraud: NSE mulls removal of audit firm Price Waterhouse
Exchange likely to take up the matter in its upcoming board meeting on Feb 2
 "Price Waterhouse")
Price Waterhouse
The National Stock Exchange (NSE) is likely to seek removal of auditor Price Waterhouse (PW) at its upcoming board meeting.
The move comes after market regulator Securities and Exchange Board of India (Sebi) imposed a two-year ban on PW for alleged involvement in the Satyam accounting fraud case.
The country's largest stock exchange had appointed PW as its currently statutory auditor of the exchange for a period of five years starting September 2016.
Sebi's ban on PW is applicable on all listed companies and also on intermediaries registered under it.
"The exchange will propose a resolution for changing its auditor at its board meeting scheduled for February 2," said a senior exchange official.
As per the Companies Act, the auditor appointed under Section 139, 140 may be removed from his office before the expiry of his term only by a special resolution of the company. This requires shareholders' approval in the annual general meeting. Prior to this, the entity has to obtain approval from the Central government/Ministry of Corporate Affairs. Provided that before taking any action under the sub-section, the auditor concerned shall be given a reasonable opportunity of being heard.
The company can simultaneously also initiate the process of appointing a new auditor to replace the current one.
Sources said that PW had a several rounds of meetings with NSE following the Sebi ban. PW is keen on staying as the auditor till the matter is heard by the Securities Appellate Tribunal (SAT).
The exchange is keen on appointing a new audit firm, even of PW obtains SAT stay on the Sebi order, a source said.
When contacted, NSE declined to comment.
Last week, PW filed an appeal before SAT seeking a stay on the Sebi order. However, tribunal refused to grant a stay on the two-year ban but allowed PW to continue serving its existing clients.
The order also banned its two erstwhile partners -- S Gopalakrishnan and Srinivas Talluri -- have been directed to jointly and severally disgorge the wrongful gains of Rs 131 million with interest calculated at the rate of 12 per cent per annum from January 7, 2009, till the date of payment.
SAT will next hear the matter on February 13.
Following the Sebi order, lots of firms are likely to initiate the process for replacing PW as their audit firm.
"The challenge before the PW is to hold clients no matter its listed or unlisted or a private firm as the Sebi order built an uncertainty among clients who do not want to indulge into any services fearing reputational risk," said an expert, requesting anonymity.
In all, PW clients during FY17 accounted for nearly eight per cent of the combined market capitalisation of all listed companies and 6 per cent and 4.5 per cent of the universe combined net profits and net sales in FY17. PW was the statutory auditor for 85 listed companies in 2016-17, and these companies spent Rs 1 billion on audit expenses during the year. This financial year, PW has around 75 listed firms on its roster.