oppn parties Accounting Scandals Keep Tumbling Out

News Snippets

  • Supreme Court sentences Congress leader Navjot Singh Sidhu to one year rigorous imprisonment in the 1988 road rage case
  • Home Minister Amit Shah says rights should not be demanded before fulfilling responsibilities and that universities are no place to wage ideological battles
  • NIA court convicts JKLF chief Yasin Malik in terror funding case after he pleads guilty of all charges
  • A study backed by PM-EAC has recommended universal basic income and urban job guarantee and greater spend on social sector schemes
  • Supreme Court rules that the decisions of the GST Council are not binding on the Centre and the states, leaving the door open for states to levy further taxes
  • After sustained campaign by BJP MP Arjun Singh, the Centre today withdrew the jute price cap order, industry welcomes move
  • Akasa Air might postpone its July launch due to late arrival of aircrafts
  • Metro Cash & Carry decides to sell Indian operations. All major players, including Reliance retail and Amazon, are likely to bid
  • Local and global cues spook the markets on Friday - Sensex crashes 1416 points to 52792 and Nifty by 430 points to 15809
  • IPL: RCB crushes GT by 8 wickets as Virat Kohli returns to form with a well-made half century
  • Nikhat Zareen is world champion in flyweight category. Wins gold at Women's World Championships at Instanbul
  • Supreme Court uses its special powers under Article 124 to release A G Perarivalan, a Rajiv Gandhi assassination convict
  • Indrani Mukherjea, prime accused in the Sheena Bora murder case, gets bail from Supreme Court after 6.5 years in jail
  • Hardik Patel quits Congress, says top leaders distracted by mobile phones and state leadership busy arranging 'chicken sandwiches' for them
  • Anil Baijal resigns as Lieutenant Governor of Delhi citing "personal reasons"
Nikhat Zareen is crowned world champion in the flyweight (52Kg) category at the Women's World Championships in Istanbul /////// Supreme Court sentences Navjot Singh Sidhu to rigorous imprisonment of one year in the road rage case /////// Sunil Jakhar, who quit the Congress a few days ago, joins the BJP
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