After Enron, Arthur Andersen collapsed. With a new bombshell allegation about Satyam Computer Services (NYSE: SAY), will its former auditor PriceWaterhouseCoopers (PWC) be next? To be fair, I have not seen any evidence implicating PWC in the Satyam scam. But surely PWC can't have been so incompetent that it did not know what its client was doing.

Satyam's CEO, B. Ramalinga Raju, initially claimed that there was a $1.1 billion shortfall between its reported and actual cash. Now an Indian prosecutor alleges that Raju made up 10,000 employees and then used the money those fake employees would have received (net of taxes and insurance) to buy land through almost 400 companies with fake names -- including that of his elderly mother. The prosecutor also alleges that Raju forged documents related to bank deposits.

You can't make this stuff up! And if these allegations are true, it does make me wonder what PWC was doing to earn its fee. There are some basic things that auditors are supposed to do -- like checking a company's bank deposits and comparing those to what management reports or verifying that the employees who are getting paid actually exist. If PWC couldn't pull off these basics, then it was either incredibly incompetent or in with management on the scam.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.