About a decade back, Global Trust Bank used to be audited by Lovelock and Lewes (L&L). The audit firm declared the bank a going concern and raised no objection to the (gross under) reporting of NPAs by the bank. Following the aborted attempt to merge with the then UTI Bank ( now Axis Bank), media was awash with the terrible state of GTB's asset book. On RBI's diktat, GTB changed its auditors .... it took PWC as its auditors. Some how, everybody missed the fact that L&L and PWC were just two arms of the same group. L&L was PWC's sister concern...they call it 'network firm'. And what happened to GTB is something we know.
About half a decade back, Satyam Computers used to be audited by PWC...( well... Ramesh Rajan from PWC says it was Lovelock and Lewes and that the fee deposited by Satyam Computers to PWC was transferred to L&L !) ...the creative internal accounting these firms follow is immaterial. What happened in Satyam Computers is something we know.
And now, PWC is back in the news. The IT Dept says, the firm advised Nokia on what it considers a Rs 2500 Cr tax evasion. They have 'missed' claiming TDS on their payments to their parent company.
It is PWC again and again. In the first two cases the shareholders lost heavily and in the third - the Government has (atleast till now). PWC is still a 'respected international audit firm'.
The problems are basic and pertain to conflict of interest.
a) The audit firm also doubles up as a tax consultant ( Well, some of them don't do it directly - they have 'network' firms to do it for them ).
b) The audit firm is supposed to give an opinion on the accounts of a company - basically the results of performance of the managers and promoters to the shareholders - but are paid by the managers.
And till we resolve these issues, there will be managers in firms who will be willing to pay a price and price waterhouses which will sell themselves...