Investors of Satyam, the Indian outsourcing company embroiled in a billion-dollar fraud scandal, are demanding to know why auditors from PricewatehouseCoopers failed to detect the accounting irregularity.

PwC's role in the Satyam scandal is set to be investigated by the Securities and Exchange Board of India, the markets watchdog, and the Indian government's anti-corruption office, the Times reported.

Only ten days after being brought in by the company to explore merger opportunities, Merril Lynch found that the books did not balance. PwC India has been handling Satyam's audit since 2000.

Chairman B. Ramalinga Raju confessed shortly afterwards he had artificially inflated the company's profitability, falsely boosting its balance sheet by $1bn (£655m).

In a statement yesterday, the firm said: 'The audits [of Satyam] were conducted by PricewaterhouseCoopers 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. PricewaterhouseCoopers will fully meet its obligations to cooperate with the regulators and others.'

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PwC in spotlight for Satyam audit