Price Waterhouse, the firm that audited the accounts of Satyam [Get Quote] Computers, may have been misled into believing forged documents that sought to verify the existence of 175-odd fixed deposit receipts, valued at over Rs 3,319 crore (Rs 33.19 billion), and all the company's current account deposits.

Government agencies probing the Satyam accounting fraud are in possession of what may well be forged letters from banks certifying that they had issued those FDRs. Sources in one of these banks told Business Standard that it had not issued any letter certifying the existence of FDRs to Price Waterhouse.

A Price Waterhouse team may soon make a presentation to the new government-appointed board of Satyam and explain how it relied on the documents.

Kiran Karnik, a member of the new board, said it would not be fair for him to comment on the FDRs.

The revelations of Price Waterhouse's processes give a new twist to the financial scandal, which came to light on January 7 when B Ramalinga Raju, Satyam's founder and at that time the chairman of the company, confessed to inflating the company's profits. An estimated Rs 7,800 crore (Rs 78 billion) had in effect disappeared from the company's books. The startling disclosure was made almost three weeks after Satyam Computers withdrew a controversial proposal to acquire equity in its promoter group companies -- Maytas Properties and Maytas Infrastructure.

Raju's disclosure that there was overstatement of profits for more than seven years had turned the heat on Price Waterhouse, which is being probed by the markets regulator and the government's investigating agencies.

The audit firm's stand however is that there was no complicity of any of its employees and that it followed all auditing procedures. After verifying the numbers and looking at the certificates, there was little reason to suspect Satyam's internal audit department, which had recently been recognised as the best internal audit department by the Institute of International Auditors of the USA. Satyam's revenues were also certified by the Software Technology Parks of India.

There has been no change in the status of the partners who signed Satyam's accounts. Price Waterhouse has also extended its full co-operation with the government in the investigations.

The details of the FDRs, which Price Waterhouse had physically verified, show that most of these instruments were due for redemption between October 2008 and February 2009. The Satyam accounts were audited for the period ended September 30, 2008.

A senior partner of an auditing firm said it was possible that either the company had redeemed most of these FDRs after the accounts were audited or the FD receipts and the confirmatory letters received by Price Waterhouse from the banks were forged.