A high-powered committee of the Institute of Chartered Accountants of India (ICAI) has recommended strict disciplinary action against four Hyderabad-based audit firms for their involvement in the Satyam scam, more than a year after India's largest corporate scandal came to light.

The committee was set up by ICAI, the country's accounting rulemaker, at the government's behest to look into the scandal. It has suggested regulatory action against Krishna & Prasad, Rao & Shyam, P Viswanath & Associates and GMK Associates. This is the first time that domestic firms coming under scrutiny in the high profile case. Indian arm of the global accounting firm PriceWaterhouseCoopers is undergoing a probe for its role in the case.

The committee's report, which is now under consideration of ICAI's apex council, said these firms among themselves audited the books of around 19 companies, which lent more than Rs 1,200 to the erstwhile Satyam. The receipt of this amount, however, was not shown in Satyam's audited accounts.

The committee had gone on basis of the findings of the Central Bureau of Investigation (CBI) that 37 privately owned companies had passed on to Satyam a sum of Rs 1,240 crore. When contacted, ICAI's outgoing president Uttam Prakash Agarwal acknowledged that the report has been tabled before the ICAI Council, which after deliberation will forward it to the ministry of corporate affairs and other agencies. He, however, refused to divulge details of the report.

At a time when the auditors of Price Waterhouse who had signed the audited books of Satyam faces the risk of being stripped of their membership of ICAI for alleged dereliction of duty, the four domestic firms may face a similar punishment, if the Council approves the committee's recommendations, said an official with the ICAI Council, who asked not to be named.

The report says that information on the auditors of nearly 50% of these 37 companies was not available. Some of the companies, details of which could not be obtained. Some of these firms — Bilgiri Agro-farms, Kalindi Greenfields, Pingala Agro-farms and Parvathagiri Agro-farms — have already been declared as plantation companies by the ministry of corporate affairs.

The committee also wants banking regulator RBI to examine the role of banks, which sanctioned loans to Satyam, the official said.

The report suggests that the ministries of finance and commerce, apart from RBI, should examine the procedure of foreign exchange controls. The report has recommended strengthening of the exchange mechanism to avoid malpractices and misrepresentation of facts.

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