ICAI to send letter of inquiry to PwC over GTB accounts

The Institute of Chartered Accountants of India (ICAI) will shortly issue the letter of inquiry to PricewaterhouseCoopers (PwC), the auditors for Global Trust Bank, for 2002-03.

The move comes in response to Reserve Bank of India's (RBI) complaint against the audit firm for failing to warn against the irregularities in the balance sheet.

"Given the public nature of the complaint and large number of people being affected, proceedings against the company would be expedited," ICAI president Sunil Goel told Business Standard.

He, however, expressed ignorance regarding the central bank's earlier complaint against Lovelock & Lewes, GTB's auditors for the year 2001-02.

"Our investigations will cover the last three financial years and hence we would be looking into audits conducted by Lovelock & Lewes too," Goel said.

The case would be taken up by the disciplinary committee of the institute, which would be examining balance sheets, auditors' report and other relevant documents for the previous three years.

ICAI also proposes to examine RBI's internal inspection reports to find out whether the conduct of auditors was lacking in any way, before coming to a final decision.

He said that the punishment could range from a letter of reprimand to cancellation of chartered accountant licence, depending on the gravity of misconduct.

A Department of Company Affairs spokesperson, Premchand Gupta, said that RBI and ICAI would be taking necessary action. " There is no need for the other wings of the government to initiate steps for the time being," he said.

The RBI had approached the ICAI to look into audits conducted during 2001-02 and 2002-03, as there were huge mismatch between the audited figures reported by the bank and the figures revealed by the central bank's internal inspection during both the years.

Even though the bank's audited balance sheet for 2001-02 showed a positive net worth, the internal inspection report revealed that after accounting for loans that had turned bad, the net worth was wiped out.

For the next year too, the RBI's report showed that GTB fell deeper into the red, which again was not reflected in the audited balance sheet.