PricewaterhouseCoopers offices searched in Satyam probe

Indian police searched the offices of PricewaterhouseCoopers, the auditors of the beleaguered outsourcing giant Satyam Computers, as the investigation into the country's largest ever alleged corporate fraud continued yesterday.

Officers in the southern Indian city of Hyderabad, where Satyam is based, said they had searched the offices of the firm's London-based auditors, PricewaterhouseCoopers, which also has offices in the city. A senior officer, VS Kumudi, confirmed the search but provided few other details as to what in particular the officers were searching for.

The auditors yesterday failed to respond to inquiries, but last week the firm issued a statement saying it had worked "in accordance with applicable auditing standards and were supported by appropriate audit evidence".

It added: "Given our obligations for client confidentiality, it is not possible for us to comment upon the alleged irregularities. PricewaterhouseCoopers will fully meet its obligations to cooperate with the regulators and others."

Yesterday's search coincided with a decision by the Indian government to order its federal fraud office to launch an inquiry into the scandal. The government said the investigators had been asked to report back in three months. The investigation, said Prem Chand Gupta, the minister for company affairs, was ordered after a report by the registrar of companies.

The move was seen as part of a broader effort to protect the country's reputation for international investment, which has taken a pounding since last week. Since then, other Indian companies have come under scrutiny, with the software firm Wipro hit by an announcement from the World Bank, which has banned any transactions with the company for allegedly pursuing inappropriate steps to bag deals.

In addition to the reputation of Indian business is the matter of the jobs of 55,000 Satyam staff, who work for clients such as ArcelorMittal, the world's largest steelmaker, and Telstra, Australia's biggest phone company.

The investigation is "a test case" for the Serious Fraud Investigation Office, said CL Bansal, who teaches corporate law at the Management Development Institute in Gurgaon, a satellite city near Delhi. "It will send a message to all other companies and prevent them from any wrongdoing."

In an announcement that shocked India's business community and its international backers, Satyam's founder, B Ramalinga Raju, last week admitted altering the company's accounts for years. Its balance sheets were full of fictitious assets and money that did not exist. Well over $1bn (£689m) was missing.