LONDON (AP) _ Price Waterhouse said regular audits of BCCI failed to discover widespread fraud at the bank because bank officials lied to the accounting firm in a sophisticated ''scheme of deception.''

Price Waterhouse provided its first detailed defense to accusations that it was negligent in failing to detect fraud at Bank of Credit and Commerce International. The auditor discussed its role in a 29-page report submitted to a British parliamentary committee Wednesday.

Price Waterhouse, which became BCCI's lead auditor in 1987, faces lawsuits in Britain and the United States that claim the firm was negligent by signing off on BCCI's audits.

Bank regulators in Britain and the U.S. seized BCCI on July 5, alleging long-term, widespread fraud. Regulators are beginning to liquidate BCCI, an international bank registered in Luxembourg with most of its operations in Britain.

The liquidators and BCCI's majority shareholders are negotiating a deal that would give depositors about a third of their money back.

A total of 1.1 million depositors with $19.5 billion on deposit were ensnarled in the bank scandal.

Price Waterhouse defended its record, saying ''even the best planned and executed audit will not necessarily discover a sophisticated fraud, especially one where there is collusion at the highest level of management and with third parties.''

The auditor said major BCCI customers and prominent members of management colluded to produce ''false confirmations to auditors confirming fictitious and non-recourse loans.''

Price Waterhouse also accused BCCI of falsifying book entries and other loan documentation. BCCI also withheld a large number of files.

In a related development, businessman Mohammed Abdul Baqi, formerly managing director of Attock Oil, was charged in Britain on Monday with conspiring with BCCI to deceive Price Waterhouse.

The charges say that between November 1987 and January 1990, Baqi and a man called Basheer Chowdry, along with BCCI senior managers, told Price Waterhouse that Attock Oil owed more than $76 million.

Baqi allegedly knew the sums were not owed to BCCI at all, and would not therefore have formed part of the bank's assets. He was being held without bail.