The government on Thursday said the accounting regulator ICAI has suggested that action can be taken against both erring audit firms and chartered accountants. The ICAI “has recommended to the government for amendments in the Chartered Accountants Act, 1949, so that action can be taken against firms of chartered accountants themselves, in addition to individual chartered accountants, for misconduct,” Corporate Affairs Minister Salman Khurshid told the Lok Sabha in a written reply.
The Institute of Chartered Accountants of India (ICAI) has submitted the first part of its report, which also includes provisions for punishing erring audit firms whose chartered accountants are found guilty of misconduct.
The first part of the report submitted by ICAI is under consideration on the government, he added.
Khurshid said the other major recommendations in the ICAI report are strengthening mechanism to monitor compliance with ICAI regulatory requirements, seeking empowerment to scrutinise financial statements of public interest entities.
It also includes “introduction of a system by the Reserve Bank of India whereby direct external confirmations on specified items like bank balances or advances or deposits can be given the statutory auditors by the banks concerned.”
At present, according to the Chartered Accountants Act, members found guilty of professional misconduct could be barred from practice for up to five years or a fined as much as Rs 5 lakh.
The role of auditors came under scrutiny, after Satyam founder Ramalinga Raju confessed in January last year of having cooked the account books of the IT firm for years.