The erstwhile auditors of Satyam, PricewaterhouseCoopers, has said its opinion on the financials of the beleaguered company may be rendered "inaccurate and unreliable". The statement has come after the newly formed board has appointed two global auditing majors KPMG and Deloitte to restate its financials for the third quarter and the last financial year.

PwC is being investigated for failure to detect anomalies in Satyam's balance sheet, which, analysts say, could have easily been detected during the auditing. 

In a letter to the new board of Satyam, PricewaterhouseCoopers said the statement by the former chairman of the company B. Ramalinga Raju, admitting to a Rs70 billion fraud, may have material effect on the veracity of the firm's financial statements.

"Consequently, our opinions on the financial statements may be rendered inaccurate and unreliable. We wish to advise that the company should promptly notify any person or entity that is known to relying upon our audit report that our audit opinion should no longer be relied upon," it said in a lengthy 3-page letter addressing the board of Satyam.

In view of Raju's admission, the audit firm also advised the board to promptly commence an independent investigation as required under the US Securities and Exchange Act of 1934 to determine whether such illegal acts, indeed, occurred.

The audit firm has hoped to work with the company and provide assistance to the new board of directors as clarifications and issues arise.

The letter was sent to the new board comprising Deepak Parekh, chairman of Housing Development Finance Corp (HDFC), Kiran Karnik, former president of the National Association of Software and Service Companies, and C. Achuthan, former member of the Securities and Exchange Board of India (SEBI).

The two auditing firms of KPMG and Deloitte will need to quickly assess the state of Satyam's finances to clear the way for a bailout to save the Hyderabad-based company's 53,000 jobs. They are not appointed auditors to the firm as the appointment ha to be ratified by the shareholders.

In his confessional statement to the police, Satyam Computer Services CFO Vadlamani Srinivas has said the auditors never pointed out any "deficiencies" during their discussions. But the most startling revelation was that fixed deposits were unreal and fictitious, which were managed with an understanding between the audit section and the top management.

The Institute of Chartered Accountants of India (ICAI) which governs the practicing chartered accountants and has the right to take action on PwC has taken a wait and watch stand. While they have issued a show cause notice on PwC there has been no reply from the auditor.

Chartered accountants body ICAI has constituted a six-member special committee to look into the auditing of crisis-hit Satyam Computer, whose disgraced founder chairman Ramalinga Raju has confessed to fudging accounts.

The special committee will be headed by ICAI vice president Uttam Prakash Aggarwal and submit its report on the Satyam auditing issue on February 11, a spokesperson of the regulator said.

ICAI council members - S L Dogra, Amarjeet Chopra, Subodh Aggarwal and Akshay Gupta -- are members of the special committee. A government nominee - K R Maheshwari, a banker and chartered accountant - is the sixth member.

There were media reports of the PwC office in Hyderabad were raided but the auditor has denied a raid but have admitted to being questioned and have offered full corporation.