Institute of Chartered Accountants of India has sought broad-ranging information about the association of its member institutions with foreign auditing firms. The move assumes significance following the accountancy fraud by the promoters of Satyam Computers that brought the role of auditors under scrutiny. The auditors concerned were associate firms of international auditing entity PricewaterHouseCoopers.
ICAI is in the process of collecting basic information such as financial statement, details of the agreement, queries related to their functioning, revenue-sharing details and so on from the auditing firms that have foreign associations. Indian auditing firms are registered with ICAI, while foreign firms do not have to be associated with the apex standard-setting body.
Though ICAI is yet to reveal what it intends to do with the data, sources said the information is being gathered to study the possibility of tightening regulatory monitoring of foreign firms that function through their Indian associates. “It is a general query to understand how they operate. Notices have been sent to Indian firms whom we regulate and lots of people are responding,” said ICAI president Uttam Prakash Agarwal.
Asked what ICAI would do with this information, Agarwal said, “Once we get the data we will apply our mind.” This latest move is part of the regulator’s efforts to bring in more transparency and accountability to the accounting profession after Satyam’s founder Ramalinga Raju confessed to long-term fraud on January 7.
ICAI has already submitted its report on the auditors’ role in the Satyam scandal, in which funds of the IT major were allegedly siphoned off by the Raju family by fudging accounts. The complaint against the auditors was their failure to detect the fraud. The institution is already in the process of curbing the practice of unrestricted registrations of the same entities in various states. The number of registrations one auditing firm can have is likely to be restricted to two.
Similarly, ICAI is attempting to prevent all audit firms, whose individual auditor members are under scrutiny for unethical practices, from taking up government auditing contracts.