Satyam's balance sheets were riddled with "fictitious" assets and "non existent" cash and contained a $1 billion gap that could no longer be concealed after a deal intended to save the struggling company was abandoned, the company's founder and former chairman B Ramalinga Raju admitted in a letter to the company's board.

A senior police official VS Kumudi said that the offices of PricewaterhouseCoopers in the southern Indian city of Hyderabad were being searched. He gave no other details. Satyam is also headquartered in Hyderabad.

As the accounting scandal unfolded, the auditing firm said in a statement last week that they had worked "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.

Pricewaterhouse will fully meet its obligations to cooperate with the regulators and others," the statement said.

The auditors were not immediately available for comment on Tuesday.

The international accounting firm, PricewaterhouseCoopers International Ltd., is based in London.

Some investors in Satyam are considering suing the auditing company, according to Ravi Nath, a lawyer with the Rajinder Narain law firm, which has been contacted by several investors.