The government is likely to examine a proposal to mandate listed companies to appoint more than one audit firm in the wake of the Satyam accounting fraud which has adversely affected the image of Corporate India.
In addition, stock market regulator Securities and Exchange Board of India (Sebi) may also be asked to appoint audit firms on behalf of the companies to ensure independence of the auditor.
Several loopholes pertaining to accounting standards followed in the country have come to light after B Ramalinga Raju, co-founder and deposed chairman of Satyam Computer Services, admitted to be doctoring the books of the IT firm.
Embarrassed regulators and policy-makers have moved fast to overhaul rules and procedures so that holes are plugged and corporate policing is strengthened.
“A proposal to this effect has already been sent and we hope that it is considered favourably as this is extremely important to ensure that such frauds do not occur in the future,” said BC Jain, member of the Quality Review Board under the Ministry of Company Affairs. The QRB is an independent body under the ministry of company affairs.
While it pushes new measures, Sebi and the government may be forced to mandate the listed companies to rotate their auditors, a practice currently being followed by public sector enterprises. This is believed to reduce irregularities that could be helped by entrenched auditors in collusion with company managers.
Manoj Kumar, managing partner at law firm Hammurabi and Solomon, told Hindustan Times that appointment of more than one audit firm would help in reducing frauds.
“However, a mechanism for double checking is already present in the form of internal auditors,” he said, adding that defining of roles and accountability must be made clearer.
Dear All
From my understandings, and experience, the rotation of auditors shall be done not only to the listed companies , as such, but also, for the other companies and firms , in which the directors, promoters, and / or other influential share holders or controlling groups as such, are there. most , of the sales, purchases, and other funds and non funds are routed thro these entities only.
For a meaning ful, real action plan, the certified true copies of internal auditors FULL reports , shall be made available , to the share holders , who seeks for it in writing . It shall be furnished to the regulatory agencies as well on a periodical basis.
All internal auditors, signing the internal audit report, shall be completely from out side the company, and also should have a 100 % arm lengh from the external auditors as well.
Further, in all, audit committee, meetings, and /or board meetings, such internal auditor or his representative shall attend in person , and appraise the committee and/ or board in detail about the reports . Further, the internal auditor, shall , give in writing , a LETTER , or a CERTIFICATE , in his official letter head, with his seal and sign, about the compliance and non compliance of various areas of operation and also certify the cash and bank and investment details and the market position and /or solvency position as on the date of report.
Further, such, an, internal auditor, shall be a MEMBER OF ICAI OR ICWAI OR ICSI and his membersip shall be in current , and he should not be a person, who , is already , facing , criminial or professional misconduct proceeding any where .
Further, he or his spouce, or children or his other dependents , or other interested persons, shall not be a person , any way ( directly or indirectly ) attached to the company in question.
The arm length should be folled in letter and spirit and he shall be fully accountable for the company and all the other stake holders as well
The required law and other regulations should be framed in these line , then only, then will improve