It has been observed that there have been a number of cases in banks and financial institutions wherein due to the erroneous/ambiguous advice tendered by the respective Chartered Accountants, borrowal accounts have had to face quick mortality resulting in loss for the bank. Many a time this has also resulted in vigilance cases being initiated with the allegations of connivance/malafide /gross negligence being attributed to the concerned Bank officials.
For the success of the profession of accountancy a self-imposed Code of Ethics is essential to command the respect and confidence of the general public. Chartered Accountants in the service of the affairs of others have responsibilities and obligations to those who rely on their work.
When in public practice, an accountant should both be, and appear to be, free of any interest which might be regarded, whatever its actual effect, as being incompatible with integrity and objectivity.
Some of the common points where reports of Chartered Accountants have not been of desirable level are:-
1. Valuation of stocks including work in progress.
2. Transactions with related parties.
3. Valuation of investments
4. Valuation and status of other assets.
5. Status of Sundry Debtors
6. Status of Creditors
7. Status of loans
8. Provision in respect of all the known liabilities.
All these issues have a considerable impact on profit and the real financial health of an enterprise, failure of which would prevent taking of a well informed, correct decision by banks and financial institutions.
The CVC has suggested that the following be mandated as a Policy :-
(a) That banks and financial institutions have independent assessment of the work of Chartered Accountants and a list of Chartered Accountants, who work objectively, may be evolved and simultaneously the list of Chartered Accountants, whose work is undesirable, can also be evolved. Such lists may be shared by nationalized banks amongst themselves. Further, if it is found that the Chartered Accountant has not adequately reported non-adherence of the laid down Statements Standards and/are Guidance Notes in preparing his reports, the concerned banks should report the matter to The Institute of Chartered Accountants of India, who should take the required action against the concerned Chartered Accountant within a specific time schedule.
(b) It could be made mandatory that companies should change their `statutory auditors’ every 3 years. Periodic changes will be healthy.
(c) “Institute of Chartered Accountants of India” is the body to which banks normally complain. But this body, at the worst, only bars the concerned CA from practice. It could be seen whether deliberate misrepresentation given by CAs can be treated as a criminal or an economic offence?
(d) Can the Institute of Chartered Accountants of India publish a list of names of tainted/banned CAs from time to time (like ECGC/DICGC list) so that banks can take cognizance of the same?
