Auditors may get powers to refuse to sign accounts

6. Auditors
may get powers to refuse to sign accounts

Auditors may get powers to
refuse signing a company’s accounts if these are not found to be in order. A
special group constituted by the Institute of Chartered Accountants of India
(ICAI), the statutory body regulating the profession in India, is veering round
to the view that the Institute should push for statutory backing to such a move.

Company balance sheets could
soon acquire a new look, with the Government asking ICAI to suggest ways to
strengthen reporting norms following Satyam Computer Services founder Ramalinga
Raju’s shock confession to long-term financial fraud on January 7. ICAI sources
said the mandate from the Government was to ensure that company managements did
not use notes to accounts as a cover-up for misdemeanors.

Currently, auditors may only
qualify accounts if managements are unwilling to accept the discrepancies they
point out. “If the law mandates that the management has to incorporate the
effects of the qualifications, the situation will be completely different. This
will also help us penalise auditors for lapses,” said an ICAI source privy to
the discussions.

“Over the next few months you
will see steps such as those initiated by the US after the Enron and Worldcom
controversies,” another MCA official said.

(Source : Business Standard,
9-3-2009)