If PricewaterhouseCoopers (PwC) seems to tumble from one scandalous audit decision to another (Global Trust Bank to Satyam Computers to Prithvi Information Solutions, to name a few) without being forced to mend its ways, it is probably because our regulators refuse to send the right punitive signals. After the collapse of Global Trust Bank, PwC dragged the RBI to court for initiating action against it. After the collapse of Satyam Computers, where it failed to detect the Rs6,000-crore fraud and widespread falsification of documents to enable the biggest corporate scandal in India, PwC is again trying to wriggle out of serious penal action. Towards the end of October, PwC filed a consent application before SEBI. This will allow it to get away without admitting any wrongdoing by paying a small penalty. This suggests that any capital market violation can be let off via the consent route. Since SEBI has no consistent and transparent system of fixing penalties based on the gravity of the violation, the amount paid usually depends on the applicant's ability to ’persuade’ the SEBI committee.
In the PwC case, there is yet another twist. Ketan Dalal, a senior partner of PwC, is a member of the High Power Committee which technically recommends the quantum of penalty (for more on this, read ‘Different Strokes’, pg 28) for orders to be passed by the SEBI whole-time member. When contacted, Mr Dalal pointed out that although he is on the Committee, he makes it a point to recuse himself even when a client of PwC has a consent application before the Committee. In fact, he says, of the 50-odd meetings of the Committee so far, he has recused himself and stepped out over 30 times.
Well, Mr Dalal may have done the right thing, but it still begs the question as to why PwC needs to be represented on the Committee at all. If SEBI could replace Nimesh Kampani on the Primary Market Advisory Committee following the politically motivated action against him in the Nagarjuna Finance case, doesn't PwC merit similar treatment? SEBI has never been shy to reconstitute committees at its convenience, so one has to assume that the continued representation for PwC on SEBI's High Power Committee is blessed by someone influential. But it does nothing to enhance the regulator's already battered reputation. Meanwhile, PwC's senior management changes have ruffled several feathers, leading to several senior-level exits at the accounting firm.