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AUDITING CASE ANALYSIS SATYAM COMPUTER SERVICES AND THE PWC BAN Brief Summary: Satyam (which ironically means truth in Sanskrit) was founded in 1987 and became

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AUDITING CASE ANALYSIS SATYAM COMPUTER SERVICES AND THE PWC BAN Brief Summary: Satyam (which ironically means "truth in Sanskrit) was founded in 1987 and became a leading technology and outsourcing firm with reported revenues of $555 million in 2008 In 2009, Satyam's founder (Ramalinga Raju) confessed to a massive accounting fraud of $1.7 billion that involved recording fictitious sales and creating forged bank statements. Raju was subsequently sentenced to seven years in prison in 2015. (Satyam has subsequently been acquired by Tech Mahindra Ltd.) Satyam's auditors (Price Waterhouse India, a member of PwC) were fined $7.5 million by the PCAOB and SEC along with a ban on accepting new SEC clients and imposition of quality controls In 2018, the Securities and Exchange Board of India (SEBI) banned PwC's India affiliates from auditing companies listed on the India Stock Exchange for two years and fined two PwC employees $2 million for wrongful gains related to Satyam (in a separate proceeding in 2015, these employees were sentenced to seven years in prison). PwC's India affiliates currently audit more than 75 Indian companies, whose engagements would be affected by this ban. In its opinion, the SEBI concluded that PwC showed "gross negligence and fraudulent misrepresentation from the firm's "continuous omission to check the figures of the company with the external sources." PwC is currently appealing the two-year ban, with a decision expected by the end of February Discussion Questions: Based on the facts above, please answer the following questions: The Satyam fraud involves a fairly straightforward auditing procedure assigned to many entry-level auditors (bank confirmations) that were received from Raju rather than directly from the bank. What aspects of an auditor-client relationship would result in lower levels of professional skepticism that would allow this seemingly obvious bad practice? The Wall Street Journal article quoted PwC representatives as stating the SEBI order relates to a fraud that took place nearly a decade ago in which we played no part and had no knowledge of. We have however learnt the lessons of Satyam and invested heavily over the last nine years in building a robust and high-quality audit practice." Write a brief opinion either supporting or opposing the above statement What are the potential impact of the two-year ban on PwC and its current audit clients in India? Would such a ban (as opposed to a ban on accepting new audit clients in India) effectively end PwC's ability to practice in India

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