India Inc is against rotation of auditors every few years. At a closed-door meeting with Sebi chairman CB Bhave, nearly 45 top honchos expressed their opposition to this move, being demanded by foreign institutional investors (FIIs). The attendees included K V Kamath, Uday Kotak, Mihir Doshi and U K Sinha.
Speaking at a CII event on corporate governance, Mr Bhave said this issue would be opened to public debate to ascertain whether auditors were the cause of the problems faced by Indian firms.
Sebi was considering the appointment of an external agency to monitor the internal auditors. “Sebi is conscious of the demand to bring the culprits to book. We are contemplating framing external agencies to examine the work of internal auditors,” he said. A consultative paper would be released shortly. India Inc were unanimous that the Satyam episode was a fraud, rather than a matter of governance, and stressed on better regulatory enforcement.
PR Ramesh, national director (Audit and Enterprise Risk Services), Deloitte Haskins & Sells said, “We can probably start with rotation of partners before moving to companies. Firm rotation was tried in Italy, where they found it does not work so well.”When asked to comment on the Satyam episode, corporates suggested the need for better auditing standards rather than more regulations. The Sebi chairman said that events like Satyam call for “immediate, medium term and long term measures” and the regulations should be tweaked, if necessary.
“Statutory auditors have to take their work more seriously. Just having more regulations doesn’t ensure better governance,” said JJ Irani, director of Tata Sons.
The company secretaries should report directly to the audit committee chairman, rather than the CEO or CFO, so as to enjoy greater autonomy. Admitting that auditors committed errors, Mr Ramesh said, “There is a disconnect between shareholder expectations, veracity of the reports and the role and responsibilities of the auditors.” The non-promoter institutional shareholders need to play a larger role in company matters.
