The Institute of Chartered Accountants of India (ICAI), which regulates the chartered accounting profession in the country, has taken disciplinary action against 120 members out of around 750 cases referred to it in the last three years.
The action had rarely been harsh. In the above-mentioned 120 cases, only in as few as seven cases was the licence revoked for more than five years. Only one member was banned from practising for life, according to ICAI President Ved Jain.
“These seven cases involve frauds like signing two sets of balance sheets, one for tax purpose and the other for non-tax purposes,” said Jain said. The majority of the cases relate to personal behaviour of a chartered accountant, like undercutting fees charged by another member of the institute, he said.
Though comparative numbers for previous years are not available, three accounting professionals said that there was higher level of action against erring CAs after the ICAI Act was amended in 2006.
Till 2006, every disciplinary action had to be taken to the ICAI Council, the apex decision-making body, which delayed the whole process. Now, after receiving the information of misconduct, the director in-charge of discipline in ICAI is authorised to take action.
The institute did not provide year-wise details of disciplinary actions initiated.
The director can write to the auditor involved asking why action should not be taken against him. Based on receipt of this reply, the director (discipline) frames a prima facie opinion on the case and refers it to the disciplinary committee.
The committee has the power to call witnesses and also seek information from all parties, including tax authorities, directors and banks.
In the case of Price Waterhouse, which audited the books of Satyam Computers, ICAI had sent a show-cause notice based on the information obtained so far. Based on the reply, the director (discipline) will decide whether to take action or not.
Under the new process, prima facie opinion has been framed in 72 cases and 82 reports of disciplinary committee submitted to the ICAI council in the last one year, according to information provided by the institute.
However, ICAI can initiate action only against its members and not an audit firm. The institute now plans to make public the list of firms whose members were found guilty by the disciplinary committee.
“The current process is adequate to regulate the chartered accounting profession in India, but the fine amount is on the lower side,” said R Bhupathi, former president of ICAI. He said the fine should be revised upwards and should move along with the nature of offence committed. At present, ICAI can impose a maximum fine of Rs 5 lakh on a member found guilty.
