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.

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