The S.E.C. and the Public Company Accounting Oversight Board fined the affiliate, PW India, $7.5 million in what was described as the largest American penalty ever against a foreign accounting firm.

The Satyam fraud, which was exposed in early 2009 when the company’s chairman admitted it, stunned India and American investors who had relied upon the company’s statements. The company’s securities traded on the New York Stock Exchange, as well as in Indian markets. Former Satyam officials, as well as two partners in PW India, face criminal charges in a trial under way in India.

The S.E.C. said the auditors had failed to independently confirm cash balances in bank accounts that supposedly rose to over $1 billion by the time the fraud ended. Had the balances been real, they would have accounted for more than half the company’s assets. The company later said that its actual cash balances at the end of September 2008 were $66 million, not the more than $1 billion it claimed.

The auditors, legally part of five separate firms that, together with five others, do business as PW India, did not seek confirmation of cash balances from the banks involved, but instead relied on management to provide them, the S.E.C. said, adding that that was a violation of auditing standards.

“The failures in the confirmation process on the Satyam audit were not limited to that engagement,” the S.E.C. stated in a cease-and-desist order issued against the firm, “but were indicative of a quality control failure throughout PW India.” The commission added that audit “engagement teams throughout PW India routinely relinquished control of the delivery and receipt of cash confirmations to their audit clients and rarely, if ever, questioned the integrity of the confirmation responses they received from the clients.”

In some cases, banks sent confirmations to the audit firm directly — despite not being asked to do so — and those statements differed markedly from the ones the management provided. BNP Paribas advised the auditors that Satyam had a cash balance on March 31, 2007, of $11.2 million, while the company claimed $108.6 million. A year later, Citibank reported $330,172 in its Satyam account, only 2 percent of the $152.9 million Satyam claimed. The audit firm did not follow up on the discrepancies.

“PW India violated its most fundamental duty as a public watchdog by failing to comply with some of the most elementary auditing standards and procedures in conducting the Satyam audits,” said Robert Khuzami, the commission’s director of enforcement.

Although audit firms around the world use similar names and are part of global networks, the firms say they are legally independent. The international networks say they have procedures to assure that their affiliates perform high-quality audits, but those procedures appear to have broken down in this case.

Those procedures include having partners from different firms in the network review audits. While the 2008 audit was being conducted, the S.E.C. said, a partner from a different PwC firm “alerted members of the Satyam engagement team that its cash confirmation procedures appeared substantially deficient,” but the Indian firm did nothing to correct the procedures.

Had the firm done as the foreign partner advised was proper, the commission said, “Satyam’s fraud could have been uncovered in the summer of 2008.”

Satyam is now under new management and continues in business. It agreed to pay a $10 million fine to settle a related S.E.C. case regarding the fraud.

The Public Company Accounting Oversight Board, which licenses and inspects audit firms, was established by the Sarbanes-Oxley Act in 2002 after the Enron and WorldCom scandals. It fined PW India $1.5 million, in addition to the $6 million penalty levied by the S.E.C.

In a statement, PW India said that it had neither admitted nor denied wrongdoing and emphasized that neither of the American regulators “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.”

The accounting board barred two PW India accountants from taking part in audits of American companies but said it did so because they had refused to cooperate with its investigation.

An official in PwC’s global network, Donald A. McGovern Jr., said that after the Satyam fraud was revealed, the PwC network took steps “to verify that professional standards relating to confirmations were being met” throughout the network. Mr. McGovern, whose title is global assurance leader, said the firm also “instituted an enhanced assurance quality review process for all network firms.”

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