oppn parties Accounting Scandals Keep Tumbling Out

News Snippets

  • After both candidates got 34 votes in HP. Congress' Abhishek Singhvi lost in the draw of lots as the BJP candidate was declared winner
  • ED issues 8th summons to Delhi CM Arvind Kejriwal in the excise policy scam case
  • Prime Minister Modi introduced the three IAF group captains - Prashanth Nai, Ajit Kirshnan and Angad Pratap - and Wing Commander Shubhangshu Shukla, who have been shortlisted for the first manned space mission of ISRO
  • Centre appointed former SC judge A M Khanwilkar as the new Lokpal. It also named three judicial and three non-judicial members of the Lokpal panel
  • A 9-judge Supreme Court bench started hearings on whether states are entitled to tax mineral-rich land in their respective states
  • Taking note of the huge disparity in charges in government and private hospitals for most treatment procedures, the Supreme Court asked the Centre to strictly enforce the CGHS rates or warned that the court would have to step in
  • Calcutta HC ruled that regardless of a woman employee being regualr or on contract and whether her contract permitted maternity leave, employers cannot deny childbirth and maternity leave to any women employee as it 'seeks to create a class within a class which is not permissible'
  • Sebi asks MF companies to disclose more risks associated with their small and mid cap funds
  • Vodafone Idea board approves Rs 45000cr funding infusion
  • NCLT clears Hinduja acquisition of Reliance Capital at Rs 9650cr upfront payment within 90 days of approval of resolution plan
  • Stocks returned to winning ways on Tuesday: Sensex gained 305 points to 73095 and Nifty 76 points to 22198
  • Commonwealth Chess championships: Mitrabha Guha wins title by scoring 7.5 points in 9 rounds
  • WPL: RCB beat Gujarat Giants by 8 wickets
  • Bengal starts paying MNREGA workers out of own funds as Central disbursement is stopped due to alleged 'discrepancies' in accounts
  • ISC chemistry paper postponed to March 21 just hours before start of exam due to "unforeseen circumstances"
Cross-voting in Rajya Sabha elections enables BJP to snatch seats in UP & Himachal /////// Congress government in Himachal in trouble as some MLAs revolt
oppn parties
Accounting Scandals Keep Tumbling Out

By Sunil Garodia

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator.

The chartered accountancy profession in India is passing through troubled times. With the regulatory body, Institute of Chartered Accountants of India (ICAI), acting like a spineless and mute spectator, the reputation of most accounting firms, including the big four, is taking a severe beating as audit scandals come tumbling out of the cupboard.

PwC had to endure a two-year ban as it 'failed' to detect the fraud in the books of Satyam Computer Services. More recently, Ernst and Young were suspended from bank audits as they 'failed' to detect the Yes Bank fraud. Now, the Enforcement Directorate has summoned executives of Deloitte and BSR & Associates (they work for KPMG in India) for the multiple frauds detected in IL& FS scam.

There is a growing perception in financial circles that these are not 'failures'. Experienced auditors like PwC, Ernst & Young, Deloitte & KPMG can point out cooked-up books in a flash. It is being alleged that auditors are colluding with managements to allow cooking-up of books. Auditors are turning a blind eye to accounting malpractices being indulged into by companies. From allowing concealment of losses and related-party transactions to ignoring fund diversion and even leaking insider information, accounting firms stand accused of unethical behaviour of all kinds.

The big four accounting firms have a firm grip on the profession all over the world. In India, they audit more than 70 percent of the big companies including groups like Tata. Since the government wants foreign investments to flow to India, it needs the backing of these audit firms. Hence, it has till now gone soft on them, despite their involvement in big-ticket scandals abroad and an increasing number of scandals in India. But with more and more scandals emerging, SEBI and the Serious Fraud Investigation Office, along with the ED, are examining the role of these auditors with a fine toothcomb.

The problem is that the profession in India is dominated by small players (audit firms with less than 5 partners) and they do not have the wherewithal to take on these global giants. Most Indian firms are also not interested in joining hands and merging to form a big firm to take on these giants, here and in other countries too. In fact, some of them are more interested to get the work palmed off by these giants in sub-contract. The ICAI is also dominated by these small players and they are more interested in retaining their turf rather than bringing discipline in the profession or ensuring that members perform their duties honestly and ethically. The National Financial Reporting Authority (NFRA), established with much fanfare in the aftermath of the Satyam scandal, remains a moribund body. Since the ICAI is either unwilling or unable to play the desired role in regulating the profession, the government must activate the NFRA, provide it with the required infrastructure and give it powers to ensure that audit firms maintain ethical standards and report all issues, even the smallest ones, with due diligence.

Pic courtesy: big4accountingfirms.com