The fraud, dubbed "India's Enron", rocked India's outsourcing industry after Satyam chairman Ramalinga Raju admitting to inflating profits over a number of years and subsequently tendered his resignation.

PwC's role in the scandal is being investigated by market watchdog the Securities and Exchange Board of India, as well as the Indian Government's anti-corruption office. PwC, which has handled Satyam's audit since 2000, said in a formal statement:

"The audits were conducted by Price Waterhouse in accordance with applicable auditing standards and were supported by appropriate audit evidence. Given our obligations for client confidentiality, it is not possible for us to comment upon the alleged irregularities."

Just 10 days after being contracted by Satyam to examine opportunities for a merger, Merrill Lynch found that the company's books did not balance.

Early fallout from the revelation included PwC's head of audit in India, Thomas Matthew, stepping down, while Subramani Gopalakrishnan and Talluri Srinivas, the two partners who signed off on Satyam audits, were arrested and refused bail.

Satyam's share price dropped more than 60 per cent after the fraud was revealed, with investors demanding to know why the PwC auditors failed to detect the accounting irregularities.

- Mark Phillips