India’s securities regulator has disciplined PwC for failing to detect a $1.7 billion accounting fraud at a defunct technology firm, saying it conducted “an eyewash of an audit exercise.”

The punishment imposed on PwC by the Securities and Exchange Board of India (SEBI) includes a two-year ban on auditing listed companies in India and a fine of $2 million, representing the “wrongful gains” from its auditing of Satyam Computer Services.

In one of the worst financial scandals in Indian corporate history, Satyam’s former chairman Ramalinga Raju admitted to inflating its profits with “fictitious” assets, non-existent cash and misreporting of debts the company was owed.

SEBI faulted PwC in particular for failing to “independently check the veracity of [Satyam’s] monthly bank statements,” saying it relied on assurances from the company “without any further examination or inquiry into the matter and ignored the balance confirmations received directly from banks which were showing true balances.”

“This appears to have been done by them to create records for an eyewash of an audit exercise,” the board said in its decision.

According to The Financial Times, the sanctions against PwC are “the latest aftershock from a scandal that imposed heavy losses on investors, and shook the reputation of an IT industry widely considered more transparent than more traditional sectors in India.”

The firm argued, among other things, that the fraud was executed at such a high level and with such sophistication that there was nothing which would have raised the auditor’s suspicion and “an auditor is not required to be a detective in the process of audit.”

But SEBI said the evidence showed “gross negligence and fraudulent misrepresentation,” finding that PwC’s “continuous omission to check the figures of the company with the external sources” could give rise to an inference of complicity in the fraud.

PwC currently audits more than 75 Indian companies covered by the two-year ban, a source told CNN Money. The firm indicated it would appeal, saying the order “relates to a fraud that took place nearly a decade ago in which we played no part and had no knowledge of.”

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