The Central Vigilance Commission (CVC) has charged the chartered accounting fraternity with giving erroneous advice to banks resulting in huge losses for the lenders.  It has pointed out that in several cases, the advice given by CAs to banks and financial institutions was deficient, especially regarding the status of loans, creditors, sundry debtors, assets, known liabilities and the valuation of investments, stocks as well as related party transactions.
“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 CAs, borrowal accounts have had to face quick mortality resulting in loss for the bank,” the CVC said in its proposed National Code of Ethics for CAs. This has adversely impacted the financial health of several financial institutions and banks, the CVC said.

It suggested that the Government make it mandatory for the Institute of Chartered Accountants of India (ICAI) to publish and constantly update a list of banned or tainted members for the benefit of the financial institutions.

The CVC has also asked the Government whether such acts by CAs could be looked upon as a criminal or an economic offence.

Simultaneously, the banks and other financial institutions should also bring out a list of undesirable CAs to help others in the business avoid the services of these professionals.

The Central Vigilance Commissioner, Mr Pratyush Sinha, told Business Line that “based on our experience, we have suggested some reforms in the system. These (the suggestions) have been sent to the Department of Financial Services in the Finance Ministry and the Ministry of Corporate Affairs (MCA).”

The CVC also rued that hardly any CAs were punished for their intentional wrongdoings, adding that the process was often time consuming.

However, the ICAI President, Mr U. P. Agarwal, told Business Line, “In many cases, we have taken action against those CAs found guilty. It ranges from issuing warning letters to cancellation of licence for whole life. The process takes around six months to one year.”

Sources said the Government was now considering notifying the CVC’s proposals to bring back public confidence in CAs, especially in the wake of the Satyam scam.

A similar Code of Ethics has been put out by the International Federation of Accountants (IFAC) as well as ICAI. Significantly, the CVC noted that the definition of misconduct under the CA Act was not exhaustive.

The ICAI Vice-President, Mr Amarjit Chopra, said, “Whenever we have taken action against wrongdoers, we have immediately brought it to the notice of the MCA, the Comptroller and Auditor General, RBI, SEBI and other regulators. If RBI wants, they can circulate the list to banks. Besides, if any auditee writes to us asking for information about any CA, we give it to them. But we are not going to make the list public.”

Pointing out that banks have suffered huge losses due to many advocates giving wrong advice, Mr Chopra asked why the CVC was silent on that.

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Category : CA, CS, CMA (3693)
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Tags : chartered accountants (575) finance minister (522) ICAI (2559) MCA (192)

0 responses to “CVC charged chartered accounting fraternity with giving erroneous advice to banks resulting in huge losses”

  1. venkataraman k says:

    CVC can weild the stick as it likes. what happened to CAG audit findings against the PSU chiefs. what is the accountability of the policiticians and the BABUS at the helm of affairs. what cvc can do for the politicians and bank officials nexus to loot the bank. where is the accountability for various frauds happenings in banks.What CVC does is one sided and it cannot take actions against its bosses. it cannot even bark agains them. what steps it is taking to bring the wealth back from SWISS Banks

    ve

  2. utpal desai says:

    there should be published by each bank/ financial institution the name of the defaultr and the financial advisor of the defaulter and the name of the officer responsible for sanction/enhancement and the regional head of the bank to make the share holders , govt authorities and others aware of the nexus between lender and borrower and the middle man

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