PricewaterhouseCoopers affiliates botched audits of an India-based computer company, failing to notice that the company had more than $1 billion of fictitious cash balances, regulators charged Tuesday.

Instead of checking with the company’s banks to confirm account balances, the auditors let management of the company,
Satyam Computer Services, perform checks for them, regulators alleged.

“PW India failed to conduct even the most fundamental audit procedures,” Cheryl Scarboro, a Securities and Exchange Commission enforcement official, said in a news release.

The Indian affiliates of Price­waterhouseCoopers agreed to pay $7.5 million in penalties to the SEC and the regulatory board set up in the United States to oversee auditors. Satyam settled SEC fraud charges Tuesday by agreeing to pay a $10 million fine. It neither admitted nor denied wrongdoing.

The case underscored that brand-name audits of multinational companies are only as strong as their weakest links, and much of the work is performed by overseas affiliates of big accounting firms.

PW India neither admitted nor denied wrongdoing. In a statement posted on the Pricewaterhouse­Coopers Web site, PW India said that neither of the regulatory actions “found that PW India or any of its professionals engaged in any intentional wrongdoing or was otherwise involved in the fraud perpetrated by Satyam management.”

In its enforcement action, the SEC accused Pricewaterhouse­Coopers affiliates of professional misconduct and violations of securities laws.

PricewaterhouseCoopers said its international network “will continue to work closely with PW India as it fulfills its commitments to its regulators, its clients and to the Indian and global marketplaces.”

The case revealed more than just a failure on the part of the auditors. It also exposed a lapse on the part of the oversight system Congress created to improve audits and protect investors from accounting fraud.

In the aftermath of accounting scandals at Enron, WorldCom and other companies, Congress in 2002 created the Public Company Accounting Oversight Board (PCAOB), whose responsibilities include auditing the auditors.

An oversight board inspection of the PricewaterhouseCoopers operation in India in 2008 did not detect problems involving Satyam.

“Following the performance of the inspection procedures, a significant issue came to light that had not been identified in the inspection review,” the oversight board said in a report released Tuesday.

Asked what that said about the inspection process, oversight board spokeswoman Colleen Brennan said inspections have revealed many problems involving both audits and companies’ financial statements. The PCAOB is constantly working to improve its inspections, she added.

In some parts of the world, the oversight board is blocked from inspecting overseas auditors, putting investors in multinational companies at even greater risk.

The Satyam debacle came to light in 2009, when the company’s chairman confessed to inflating the company’s financial results, according to PCAOB records.

When the fraud was revealed, the price of Satyam shares plummeted and institutional investors in the United States lost more than $450 million, the SEC said.

As part of the alleged fraud,
Satyam created more than 6,000 bogus invoices, including bills for nonexistent customers, the SEC said.

Satyam also gave the auditors phony documents that purportedly verified its bank balances, the SEC said.

But some banks sent the auditors information that should have raised questions, the SEC said. For example, Citibank sent the auditors confirmation of a Satyam balance of about $330,000 while
Satyam provided documentation purporting to confirm that it had about $153 million on deposit at Citibank, the SEC said.

The potentially conflicting numbers purported to confirm deposits at a different branch of the same bank, the SEC said.

Although a Pricewaterhouse­Coopers partner warned the auditors that they needed to check the bank balances themselves, the audit team “failed to take any corrective action,” the SEC said.

Failures in the audits of Satyam “were indicative of a quality control failure throughout PW India,” the SEC said.