By Raman Jokhakar, Tarunkumar Singhal, Chartered Accountants
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44 ICAI must assert itself
The complicity of statutory auditors Price Waterhouse in the
fudging of books by Satyam Computer Services is yet to be proven, although
prima facie they appear to have been negligent in exercising oversight. But
Satyam is not the first case of accounting fraud, many hundreds of companies are
known to have resorted to cooking their books. In most of these instances,
accountants and auditors who are members of the Institute of Chartered
Accountants of India (ICAI) have extended more than a helping hand. Yet, guilty
accountants/auditors usually get away with a reprimand, and in more serious
cases, with a fine of up to Rs.1 lakh or three months suspension for their
professional misconduct. Clearly, the law is not deterrent enough. Just about a
dozen or so members are known to have been handed out suspensions ranging up to
five years or even life and fined Rs.5 lakh. This would then mean that the ICAI
may be found wanting in taking disciplinary action or perhaps regulation does
not figure high in the priorities. That defeats the purpose of conferring the
institute the status of a self-regulating organisation.
The ICAI needs to assume the role of an independent regulator
more seriously, ensuring adoption of best practices by its members. It must
avoid succumbing to pressures from its members to go soft on disciplinary
measures. Implementation of the decision for compulsory rotation of auditors —
taken by its Central Council in July 2003 and being held in abeyance due to
pressures from large firms — must be expedited. Joint audits for companies with
turnover above a certain threshold has to be introduced to ensure company
accounts become more credible. The quality review board, with members nominated
by the ICAI Council and the Centre, too needs to begin work earnestly to raise
the quality of accounting and auditing, including services provided by the
internal auditors and accountants. Finally, the Centre needs to take a fresh
look at whether the existing structure of ICAI, as well as others such as
Institute of Company Secretaries of India (ICSI), really encourage independent
and impartial regulation and disciplinary action.
(Source : The Economic Times, 13-1-2009)
