The two auditors of Satyam Computer Services, appointed by PricewaterhouseCoopers to audit the accounts of the company, were not partners of the audit firm at that time, people close to the investigation told ET.

Srinivas Talluri and S Gopalakrishnan, the two partners who have been signing the Satyam balance sheets for the past several years, were actually members of Lovelock & Lewes, a member firm of PwC.

The Institute of Chartered Accountants of India (ICAI) rules make it clear that the balance sheet of a company should only be signed by the partners of the statutory audit firm. There is no provision for the function to be passed onto the partners of an affiliate even if the said firm belongs to the same family.

Uttam Agarwal, vice-president of ICAI and head of the special panel, asked to probe the auditors role in the alleged falsification of accounts at Satyam, said that the institute was still trying to determine whether the partners were members of Price Waterhouse. A partner of one firm cannot, according to the law, sign as partner of another firm, he added.

The disclosure has the potential to cause further complications for PwC whose role in the Satyam episode is being probed by ICAI.

According to a senior chartered accountant, the audited accounts may become null and void if partners who are not members of the audit firm sign on the balance sheet of a company.

A PwC spokesperson said in a statement that both are partners of PwC Bangalore, which is the statutory auditor of Satyam. However, according to ICAI, both the partners are members of Lovelock & Lewes. As of April 1, 2008, which is when the accounts of Satyam were finalised, the names of the two gentlemen appear as partners of Lovelock & Lewes.

Investigating agencies are examining the role of the statutory auditors for Satyam. We are not looking at the past. Our mandate is to find ways of rescuing the company and our top priority is to tie up funds to pay salaries to employees and meet other operational expenses, said a board member of Satyam who wished not to be named.

PwC was Satyams statutory auditor appointed by shareholders at the last AGM. As per the Companies Act, the shareholders of a company can appoint the statutory auditor of a company and also change auditors only at an AGM. The Act says that every company shall, at each AGM, appoint an auditor or auditors to hold office from the conclusion of that meeting until the conclusion of the next AGM and shall, within seven days of the appointment, give intimation thereof to every auditor so appointed.

Earlier, while speaking to ET, Mr Agarwal said that the institute was also trying to determine whether Vadlamani Srinivas - the former CFO of Satyam Computer who is currently in police custody - is registered as a chartered accountant. If he is not a member of the institute, then we cant press disciplinary charges against him, said Mr Agarwal. This implies that there can be no charges against Mr Srinivas and that he can be liable only for any other civil charges, if any.

Interestingly, Price Waterhouse has audited the balance sheets of other companies such as GMR Infra and Lanco Infra, which have a relatively large exposure in the states infrastructure projects.