INDIA: Pricewaterhouse Revamps Indian Unit

The auditor PricewaterhouseCoopers is overhauling its operations in India two months after starting an investigation into fraud at one of its Indian clients.

The auditor, which has nine offices and thousands of clients in India, said Thursday that it would make sweeping changes to "re-emphasize quality." They include adding a five-member advisory board in India, appointing a new head of risk management from outside India to oversee work in the country and a new auditing team in India, and changing the management in its office in Hyderabad.

Price Waterhouse, as PricewaterhouseCoopers is known in India, audited Satyam Computer Services, a software and outsourcing firm whose chairman said in January that he had falsely claimed assets of $1 billion in cash and overstated operating margins. Two of Price Waterhouse's partners are being held without bail in a Hyderabad jail on charges of criminal conspiracy and cheating.

Price Waterhouse has said that there was no evidence that the two auditors were complicit in the suspected fraud. Still, the changes announced Thursday may raise questions about whether quality problems are more widespread in India.

"While we are confident in the overall quality of our services and our people, the problems at Satyam have created a difficult environment, and therefore we are taking all the necessary steps to demonstrate to our clients and other stakeholders our commitment to the highest standards," Ramesh Rajan, the chairman of Price Waterhouse India, said in a statement.

Price Waterhouse's new advisory board will comprise four executives from outside the company and one PricewaterhouseCoopers executive from outside India. A new head of quality assurance and risk management, who will review the company's work in India, will also come from PricewaterhouseCoopers operations outside India.

A partner from India, Sharmila Karve, was named the new head of auditing for the firm and has appointed a new team of seven to oversee audits in India.

The global firm fully supports the new steps taken in India, Samuel A. DiPiazza Jr., chief executive of PricewaterhouseCoopers International, said in a statement. "It is essential that the quality, expertise and behavior of partners in PwC member firms all around the world are, and are clearly seen to be, of the highest standards," he said.

About a dozen PricewaterhouseCoopers examiners from outside the country have been inspecting audits and practices at the firm in recent weeks. Price Waterhouse is the only foreign auditing firm allowed to sign off on the balance sheets of Indian companies because its presence in the country predates a law forbidding the practice.

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