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ACCOUNTING regulator Institute of Chartered Accountants of India (ICAI) has taken the first step towards disciplinary action against the arrested partners of Price Waterhouse, who audited the books of scam-hit Satyam Computer Services.

ICAI’s five-member disciplinary committee has registered a case against Price Waterhouse partners S Gopalakrishnan and Srinivas Talluri and has sought information from the firm. If found guilty, the partners could lose their permit to practice. The firm has time till February-end to get information from the partners and respond to ICAI’s questions. As per a government directive, ICAI had earlier asked for the ‘working papers’ or the audit methodology that PW followed in the last five years while auditing Satyam’s accounts.

ICAI president Ved Jain toldETthat the financial review reporting board of the Institute is looking into the working papers submitted by the audit firm.

A magistrate court in Andhra Pradesh has dismissed the bail applications of Mr Gopalakrishnan and Mr Talluri, while sending the two to police custody for two days. Lawyers close to Price Waterhouse, who asked not to be named, said that the police’s version that the two had confessed to colluding with Satyam promoters in the fraud, was based on the fact that PW had withdrawn its audit opinion of Satyam.

Recalling audit opinion is a statutory requirement when the audited company restates its financial statements, they said. PwC had said on January 15 that its reports of Satyam's accounts couldn't be relied on. The audit firm, in the meanwhile, stated that both Gopalakrishnan and Talluri have strongly rebutted the prosecution's allegations that they engaged in criminal conduct in relation to their work on Satyam Computer Systems’ audit.

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