Recently, at a social meeting, one got the opportunity to pick the brains of an elderly businessman in south Delhi. A self-made man and successful in his own way, our friend is now enjoying semi-retirement, having passed on responsibilities to the next generation.
As talk veered into the government efforts against undisclosed money, he came up with a shocker. “We should do away with the auditors.” Looking at my 'You must be joking’ face, he said, “No, I am serious.”
He shared an anecdote about how a businessman he knew, worth a couple of hundred crores, was carrying on for years without a Permanent Account Number (PAN). One day, he got a notice from the income tax department. He took it to the chartered accountant (CA) handling his accounts. The CA asked him how the notice came. “By ordinary post,” the client replied. “He just tore off the notice and asked him to forget it. Nothing has happened so far,” our narrator added.
While our friend might have exaggerated a bit and his solutions a bit extreme, it is difficult to completely brush away his point. There are issues with accounting and audit professionals. These issues are increasingly coming to light, as more and more people look into public filings and unearth scams.
Two weeks earlier, a private portal, wikileaks4india, in an investigation titled ‘Operation DDCA’, unearthed 14 companies not found at their registered address. Who structured these companies? Who filed their papers and audited their books? The telecom spectrum scam, where money was routed through certain companies to entities connected to political parties, numerous money raising scams and ponzi schemes, which often have covert or overt political patronage, and corporate scandals have people from the audit profession playing a pivotal role. This has given rise to social media adages such as ‘Where there is a scam, there is a CA.’
However, the focus of investigations and media coverage has rarely been on auditors. The Institute of Chartered Accountants of India (ICAI) needs to take a more pro-active role. However, it is bound by the processes and procedures mandated by the law, its office-bearers have told Business Standard on various occasions. But, critics say, there is a fundamental conflict of interest that hampers the elected body’s effort to perform its quasi-judicial functions. As of June, 116 cases were pending before the disciplinary committee, which has two to three meetings every month.
Investors of National Spot Exchange had to move court to expedite action. Nearly three years after the exchange ran into the ground, ICAI’s proceedings are moving at their own pace. In November, the Institute had said the enquiry by its disciplinary committee would be conducted in December. Last week, the spokesperson informed that the matter was adjourned to January, after a part-hearing in Mumbai on December 18.
In June, we reported how proceedings against auditors of the erstwhile Global Trust Bank had dragged on for over 10 years (https://www.business-standard.com/article/current-affairs/ten-years-on-icai-probe-into-gtb-auditors-role-still-not-complete-115062900065_1.html).
Proposals by corporate affairs ministry for an independent agency to probe such accounting frauds have been doing the rounds. However, the CA body, responsible for the chronic delays in enquiry and impunity, seems to be keen on retaining its powers and has been making noises against the move. Let the new year bring us the much needed reform that would put the greater common good above narrow vested interests.
As talk veered into the government efforts against undisclosed money, he came up with a shocker. “We should do away with the auditors.” Looking at my 'You must be joking’ face, he said, “No, I am serious.”
He shared an anecdote about how a businessman he knew, worth a couple of hundred crores, was carrying on for years without a Permanent Account Number (PAN). One day, he got a notice from the income tax department. He took it to the chartered accountant (CA) handling his accounts. The CA asked him how the notice came. “By ordinary post,” the client replied. “He just tore off the notice and asked him to forget it. Nothing has happened so far,” our narrator added.
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He said but for the auditors and accountants who help them, ordinary people like you and I would not dare to fudge so much. “You simply won’t have the confidence. These auditors misguide you into doing shady things, they get you into trouble and then they get you out of it and make money in all three.”
While our friend might have exaggerated a bit and his solutions a bit extreme, it is difficult to completely brush away his point. There are issues with accounting and audit professionals. These issues are increasingly coming to light, as more and more people look into public filings and unearth scams.
Two weeks earlier, a private portal, wikileaks4india, in an investigation titled ‘Operation DDCA’, unearthed 14 companies not found at their registered address. Who structured these companies? Who filed their papers and audited their books? The telecom spectrum scam, where money was routed through certain companies to entities connected to political parties, numerous money raising scams and ponzi schemes, which often have covert or overt political patronage, and corporate scandals have people from the audit profession playing a pivotal role. This has given rise to social media adages such as ‘Where there is a scam, there is a CA.’
However, the focus of investigations and media coverage has rarely been on auditors. The Institute of Chartered Accountants of India (ICAI) needs to take a more pro-active role. However, it is bound by the processes and procedures mandated by the law, its office-bearers have told Business Standard on various occasions. But, critics say, there is a fundamental conflict of interest that hampers the elected body’s effort to perform its quasi-judicial functions. As of June, 116 cases were pending before the disciplinary committee, which has two to three meetings every month.
Investors of National Spot Exchange had to move court to expedite action. Nearly three years after the exchange ran into the ground, ICAI’s proceedings are moving at their own pace. In November, the Institute had said the enquiry by its disciplinary committee would be conducted in December. Last week, the spokesperson informed that the matter was adjourned to January, after a part-hearing in Mumbai on December 18.
In June, we reported how proceedings against auditors of the erstwhile Global Trust Bank had dragged on for over 10 years (https://www.business-standard.com/article/current-affairs/ten-years-on-icai-probe-into-gtb-auditors-role-still-not-complete-115062900065_1.html).
Proposals by corporate affairs ministry for an independent agency to probe such accounting frauds have been doing the rounds. However, the CA body, responsible for the chronic delays in enquiry and impunity, seems to be keen on retaining its powers and has been making noises against the move. Let the new year bring us the much needed reform that would put the greater common good above narrow vested interests.