Apex chartered accountants institute ICAI has so far barred CAs from practising for a maximum of five years in 41 cases, but may ban those involved in auditing Satyam books for life, if found guilty. “We have written to the disciplinary committee of ICAI. If found guilty, CAs involved in Satyam Computer’s auditing could be banned for lifetime,” Institute’s President, Mr Ved Jain said here. Mr Jain said before the body takes any action against the members involved in the “fraud”, it needs to collect all facts and information… “so we are looking into that and we will start our proceedings, ” he added. So far ICAI has taken action against 122 CAs in various auditing irregularities, he said. As many as 41 cases were big, where CAs were debarred from practising for five years, Mr Jain said. He said the institute cannot take action against PriceWaterHouseCoop ers, auditors of Satyam Computer, but only against individual CAs. “We will ensure that to any person who has not worked according to our standards and our expectations, severe punishment be given,” he said. In fact, the ministry of corporate affairs announced that role of directors and auditors at Satyam will be scanned by ICAI and the apex body of Company Secretaries – ICSI. Following a letter from Satyam Chairman Mr Ramalinga Raju, who accepted that he had misrepresented facts in the company’s balance sheet, the role of auditors and accountants for the company has also come under scanner.
Auditors and Chartered Accountants with a black brush
The Satyam fiasco has called into question the sanctity of its auditors. Although it’s still early days to speculate whether Satyam’s auditors were party to the fraud or merely failed to perform their duties, it is beyond doubt that the whole incident threatens to paint the fraternity of auditors and chartered accountants with a black brush.
On the issue, an ICAI council member, who declined to be named, said: ‘As auditors, we definitely have a role to play. This incident gives the entire CA fraternity a bad name. If we unravel any wrong doings on the part of the auditors, the institute will initiate action against the concerned auditor.’ KPMG head of markets Pradip Kanakia said: ‘Audit professionals globally were just about recovering from the scam in the US and Europe. Now, auditors’ role will be questioned in India too. If negligence on the auditors’ part is proved, there will be huge dent on the confidence on auditors in general. Although, PwC is our competitor, this is not the time to rejoice.’
Mr Kanakia felt that given the magnitude and complexity of the fraud, role of everybody concerned would be questioned. ‘This needs deep investigation and it would require months to unravel the whole story.’ Mr AK Doshi, partner of Doshi, Chatterjee, Bagri & Co, also observed that it was a collective failure of the Satyam management, its board of directors, and senior executives, audit committee and its internal and external auditors. ‘This seems to be a one-off incident and we need some more clarity to term this a systemic failure. So far what has come to the media glare may not be the whole story. This may have a negative impact on the confidence on CAs in general,’ said Mr Doshi.
Satyam is listed in the US and accordingly may face penal action by the US Securities and Exchange Commission. ‘Under Sarbanes-Oxley Act 2002 of the US, the Satyam management and its auditors may face penalty as well as criminal proceedings for wilful mis-representation of financial statement,’ said Arijit Chakraborty, vice president Inkwest Management Consultant, a business advisory firm.
Another accountant said: ‘Auditing as a profession may go down as a result of the incident. But unlike the Enron case in the US, no nexus has yet been proven between the auditors and Satyam. Also, auditors — be in Big 4 or Big 20— get very little time to go through the information provide by the company given the pressure of quarterly audits. Having said that I must also say since cash was involved in this case, there must have been some lapse on the part of the auditors.
After all, auditors are required to go through reconciliation of bank accounts and obtain confirmation from bankers. They also need to check the fixed deposits.’