Press Release issued by ICAI

ICAI, robust regulator of accounting and auditing profession in India, committed to conclude the disciplinary process against those found involved in the PNB scam

ICAI is an autonomous regulator of accounting profession created by Chartered Accountants Act, 1949. During its existence of 69 years, ICAI is contributing in public interest with sole mandate of independence, integrity and excellence.

As per framework of governance, standard setting and disciplinary mechanism prescribed in the Chartered Accountants Act, 1949, a strong public interest oversight mechanism is inherent in ICAI structure since 8 Central Council Members on the Central Council (Apex body) of ICAI are nominated by the Government of India. Similarly, each Disciplinary Committee has two Government nominees and each Board of Discipline has one Government nominee and the Chairman of Appellate Authority of Disciplinary mechanism is a retired Judge of High Court being nominated by Central Government. Moreover, all the Standing and Non-standing Committees of ICAI has Government nominees as the member. All the decisions of the disciplinary Committee and Board of Discipline are taken on consensus basis. Besides, there is self-regulated mechanism in the form of Peer Review Board, Financial Reporting Review Board and Quality Review Board which have nominations from the Government of India. Moreover, Chairman of the Quality Review Board is appointed by the Central Government.

In the matter of irregularities in PNB that has been reported in media on 14th February, 2018, the disciplinary directorate of ICAI suo moto has started investigation as per Chartered Accountants Act, 1949 and issued letters on 15th February, 2018 to PNB, SEBI, CBI and ED urging them to share details of reports / findings in respect of alleged frauds.

The ICAI has also set up a High Powered Group to study the issues in PNB bank matter and suggest remedial measures and improvements in the banking system. First meeting of the Group has already been held on 23rd February 2018, in Mumbai. The officers of PNB were called by ICAI to appear and produce copy of all related documents in the said frauds. GM Western Zone, PNB appeared and made his statement in Mumbai.

The Directorate of Discipline of ICAI has also issued show cause notice to all Central Statutory Auditors of PNB and the auditors of Gitanjali Gems Limited. As such, ICAI’s commitment to be pro-active regulator of the Auditing and Accounting profession through investigation is to ensure accelerated conclusion of proceedings and take action against those members of CA profession who are involved in the fraud at PNB.

In the background of pro-active steps, ICAI supports every effort of strengthening the existing mechanism but the model of oversight mechanism on the pattern of overseas regulations like Sarbanes Oxley Act 2002 has been found to be ineffective in so far in back-drop of banking sector mortgage scams in USA 2008-2009.

Further, Parliamentary Standing Committee in its own wisdom and after multi stakeholder consultation, in its 37th Report has recommended, “Consistent with its position on strengthening the oversight of corporate audit, the Committee desires that the existing mechanism in this regard under the ICAI Act should be streamlined and strengthened without needlessly adding to regulatory levels. This may be undertaken in consultations with the Institute of Chartered Accountants of India (ICAI), which is the designated elected self regulatory body for professional audit in the country. …”

Last year, the Central Government appointed High Level Committee (HLC) comprising of Government Nominee members of the Disciplinary Committee of all three sisters Institutes namely The Institute of Chartered Accountants of India (ICAI), The Institute of Company Secretaries in India (ICSI) and The Institute of Cost Accountants of India (ICoAI) to suggest amendments in the respective Act for strengthening the disciplinary and oversight mechanism of all three Institutes. The ICAI has already submitted its comments to the recommendation of HLC, which has also already drafted amendments to the Chartered Accountants Act, 1949; Company Secretaries Act 1980, and Cost Accountants Act 1959 in line with the HLC report. In fact even before formation of the HLC, ICAI has pro-actively constituted internal group to review the disciplinary mechanism and already submitted its suggestions to Government for suitable amendment in Chartered Accountants Act, 1949.

In view of all the pro- active steps taken by the ICAI, a robust regulator of accounting and auditing profession of India, ICAI’s commitment to conclude the disciplinary process against those found involved in the PNB scam remains high.

Till the time disciplinary inquiry is concluded, and the role of all those who acted in fiduciary responsibility is established in the matter, it would not be prudent to draw any conclusion against the profession. As such, ICAI remains committed as proactive regulator to ensure accelerated inquiry and conclusion of the disciplinary proceedings in PNB matter and supports any improvement in the existing disciplinary mechanism in view of HLC recommendations for all three Sister Institutes.

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31 responses to “PNB Scam: Not prudent to draw any conclusion against CAs and profession before anything gets established: ICAI”

  1. vnayak says:

    In my previous response, Pl substitute the words ‘ignorance’ with ‘innocent’. Sorry for typos.

  2. vnayak says:

    It’s High time the CA Fraternity is held responsible for their acts of omission & Commission & als punished like other public figures. You simply can’t have the cake & eat it too, for long. These professionals cannot simply play ignorant especially in setting up sophisticated web of shell companies for money laundering, with full knowledge of the purpose of such ventures. We have example of ‘satyam’ with bloated & manipulated balance sheets. Yet these professionals claim ignorance. What a Joke. Coomon wake up guys.

  3. CA Kanika says:

    Instead of criticising auditors and such a reputed profession(as it is done by most of the people here who have their own reasons to do so)it is the management who is the main culprit in this case.Had it followed the procedures and rules it had not lead to such kind of frauds one after another.Just look at the point from where it got emerged and dont look at it from the end point.First of all its the management who is responsible for the frauds and not the auditors.

  4. pradeep garg says:

    everybody is blaming the professional who is also a normal person and enjoys all civil liberties in the society. in fact the governing laws must be revamped thoroughly. as the ever changing computers and information technology has bypassed the old aged established criminal laws, the business laws have also become a game. Large organisations cannot be owned by few persons but our laws make it possible and compliance of law or public interest becomes a joke. reports are fabricated, defaults are ignored at the behest of management who actually commit the mistakes. we are not short of lawyers and advocates, yet we have been given quasi judicial officers who don’t have legal background and civil court has been divested of jurisdiction. but nobody wants to plug the loopholes. Is it not possible to develop special courts for each branch of law? is it not possible to develop cadre of judicial officers like IAS, IPS IRS etc?.

  5. Sreejith says:

    The PNB fraud is one more fine example
    which Pointsout fingers to the bank brach auditors, the
    Chartered accountants. The majority of the branch
    Auditors now a days just sign the reports generated
    By the banks Cbs system.The icai which boast of its
    Legacy is sitting in false heaven.The profession
    Now has a handful of good for nothing fellows
    making money by putting signatures on even on toilet
    Papers.Icai instead of praising themselves come
    Out with a plan to revamp its members and stop
    Senting any dick and harry to whoae only experience
    With the banking sector is standing before Atms.

  6. A L Chaudhary says:

    This is a shameless argument. Even job rotation principle was not followed and auditors have not brought in their report. .This was enough signal for scam and auditors and senior management kept quite.

  7. BANKER says:

    If auditors are not responsible ? What is the use of Statutory Audit, monthly concurrent Audit, stock audit etc., No Auditors can refuse that all bank audits are being done with the articles. When CAs themselves do not have any operational exposure of banking how do except from the articles? If it is not remunerative let them not take up the work instead of deteriorating the quality.

  8. BANKER says:

    All auditors shall be held responsible for the fraud, if not what is the purpose of Audit. what is the use of Bank statutory Audit, concurrent Audit, quarterly Audit of large advances , stock Audit etc., NO AUDITOR CAN REFUSE THAT ALL CONCURRENT AUDIT IS BEING DONE BY THE ARTICLES WHEN THE CA THEMSELVES ARE NOT FAMILIAR WITH BANKING OPERATIONS, WHAT A ARTICLE CAN DO? IF IT IS REMUNERATIVE DON’T ACCEPT.

  9. Ravindra Dave says:

    The Auditors are appointed by the shareholders. The shareholders have to be serious in appointing as well as review of the audit report. Often the report is taken as read in meetings.
    The auditor has to do his professional job , demand data and documents as well as time to audit and refuse to sign if the audit comments are not included in the report. He has to have moral courage.

  10. T R Natarajan says:

    Why the Branch Statutory Auditors accept the appointment order of the banks which indicate that the audit should be completed within a few days? And why they should comply with that and get caught when a PNB situation arises? The fraud has also happened in a branch only.

  11. Gopinath says:

    Agreed, but then what are auditors for if they are not able to point out irregularities in the accounts. That is their basic function. I am writing this as a sympathiser of the CA fraternity.

  12. Manoj Kumar Sharma says:

    With respect to all respected members
    Only one thing ,which we want to know,Why the investigations done after happening of Scams,why dont we take precautions and attempts to stop all these in advance.

  13. sujeet kumar says:

    Appointing authority should be shifted from employer( company) to some other agency under the supervision of GOI.


    Why not hold CAs responsible. Many times these Auditors make test checks and leave out the rest to God. Had these CAs checked thoroughly these scams Like NIrav Mody, Mehul, Reddy, Winsome, Rotomac would not have happened. In many of the cases these CAs may be in connivance with fraudulent managements. These CAs and the their firm should be asked to make good the loss and should be debarred for life. Then only these people will become serious.

    RBI is also equally responsible for this mess.

    Many scams have happened in PNB in recent past. PNB should be closed to save the citizens money.
    How PNB was awarded best governed bank i do not understand.

  15. Sandeep Ghosh says:

    It is true that unless the autopsy results are out it’s not prudent to comment on the doctor who operated. But frequency of incident becomes a testimony. Not pointing towards any professional entity, it can be said for irregularities regulation policy has to be relooked. Definitely the audit mechanism is somewhere wrong. Probably other forms of audit by other bodies are a necessity for health of the economy.

  16. L.R.Vishnuram says:

    Chartered Accountants / Auditors has been made as a scapegoat for the failures of others.

    When things don’t go well, people always look for a scapegoat. The term scapegoat means to blame them publicly for something bad that has happened, even though it was not their fault.

    The strength of the chain is the strength of its weakest link. Thus, the weakest link is to be determined whether it is Bank Management or Concurrent Auditors or Statutory Auditors or IT Auditors or RBI Inspectors or Others who have clearly failed to check the directions of RBI and let the fraud made happen.

    Hence, it is not prudent to draw any conclusion against CAs at once immediately.

  17. Nandan kumar ghosh says:

    Nothing has been established against CA Firms systems haveben flouted and misused in connivance with Banks officers with or without the knowledge of
    the CA firms so benefit of doubt should go to them

  18. amit ajmani says:

    How statutory auditors can escape the responsibility , if PNB has refused to share the information , what was preventing them to qualify in their report .

  19. Ravi Aguva says:

    Our whole Financial regulatory eco systems are neither interested nor competent to prevent or punish the day light thuggery being committed by Rogues of platinum gardens who rub shoulders with the high and mighty of our ‘karma bhoomi’ day in day out. The loot continues.

  20. RAKESH K MILWANI says:

    CAI comprising of elected representatives of Chartered Accountants, makes complaints that the Government id only following blame game on Chartered Accountants. Why don’t you call upon all Chartered Accountants not to apply for and accept any Government Audit including that of PSU, banks and other Government audit. On one hand you live in charity of Government and in the other hand you criticize the Government. This is not done.
    Let ALL Chartered Accountants take a pledge of not accepting want Government Audit not shooting for the same


    The RBI had asked all banks to integrate their accounting system like Finacle etc. with SWIFT in August 2016 after the cyber attack in Bangladesh on their central bank’s Swift system. This exercise was supposed to be completed by March’2017 by all PSU banks. The RBI had further asked the banks to tally all transactions conducted through Swift manually with Finacle on DAILY BASIS till the integration is completed.
    If PNB has not followed this directive and have incurred loss of 12,600 crores, responsibilities should be fixed on all stakeholders- Bank management, concurrent auditors, statutory auditors , IT auditors, RBI Inspectors etc. who have clearly failed to check the above directions of RBI and let the fraud happen.

  22. M C Shyamsukha says:

    This request is to cover up the irregularities committed by the CAs who have been doing the audits on behalf of RBI every year in PNB and also the audits for these scamesters firms every year and filing the reports with IT and giving the reports for public. Had there been any sincerity shown by CAs, frauds of this nature could have been prevented.

  23. R. Balasundaram says:

    This is only self defence by ICAI.

  24. shailesh n kelkar, tax lawyer says:

    Yes, action taken in PNB scam against CAs is right.
    Instead of hard work this community believe in technology.
    Instead of legal compliance this community believe in
    Having no legal background this community is allowed to interpret law
    In every report, where specific question is asked, acting in smart(?) manner, disclaimer clause is put.
    This community should not be allowed any authority, as this community is not more than munims in older days.
    importantly, under pretext of professional ethics , this community is only involved in making money & unfortunately, all corporate supports this community

    • Chandrakant says:

      Dear Sir,
      I always wonder why disclaimer call is put by auditors If they do not get information or records be specific. So that stakeholders will come to know : “As per knowledge , belief and record produced to us ” is as statement which tries to cover their cowardice or inefficiency.
      Well said Mr. Kelkar

  25. VIjay Inder Dosajh says:

    No body would accept this version.. A simple checking that Letters of Authority were no taken on system, is obvious indication of callousness. CAs don’t believe in public propriety but sit on technicalities put up themselves. They should all be disqualified for issuing Audit certificates and work should instead, the certification work should be given to CAG teams.

    • Duke says:

      Bro kind for your information. CAG also appoints Ca for Audit. So it is not like that ban all CA and appoint CAG. Wake up !!! Good morning !!!

    • Anonymous says:

      Mr.Vijay Inder Dosajh, collusion is every where. By transferring this certficate to CAG, how one can stop this kind of frauds. If you are a professional, provide some productive measures, instead keying this kind of statements.

  26. Anil Gupta says:

    All CA Firm Related to PNB & The Company Should be Ban till Final out come of the Fraud . As per My Knowledge in the case where Buyers Credit transaction are made , US$ first Come to PNB Escrow Account and only after that the US$ Should be Transfer to Foreign suppers. More than US$ 50000/- each payment Bank has to Collect Credit report of Foreign Suppliers. Its is mandatory.

  27. DEBENDRA SABAT says:

    Every one involved in it have a pound of flesh, the check and balance system doesn’t work. In India we respect the person who has the ability to twist the law according their or their client’s needs. The professionals/highly qualified people use their skill and intelligence to empower few, which would ultimately the innocent and weak.

    • Rajesh Jindal says:

      Your wards may true, but in India for Auditing of accounts company,client themselves are the appointing authority. it s a drawback.

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