Chartered accountants and auditing firms in the country – especially the big four – are in the spotlight for their transgressions that have largely gone unnoticed. Now that the government has introduced the National Financial Reporting Authority (NFRA) under the Companies Act, 2013, CA firms and CAs can be investigated. A special report on the government's determination to hold auditors accountable and the tightening of the regulatory framework.
“CA is an arrangement in which the human resource development is done only by you. The curriculum is made by you only; you conduct the exam; rules and regulations are also made by you, and your institute only punishes the culprits.” “Now the question arises that the temple of democracy i.e. the Parliament of India, which is the voice of 125 crore countrymen, has given you so much authority, then why is it that in the last 11 years, only 25 charted accountants have been prosecuted? Did only 25 people make a mess? And I have heard that more than 1,400 cases are still pending for many years now. A single case takes years to settle…”
That was Prime Minister Narendra Modi in his foundation-day speech on July 1, at the Institute of Chartered Accountants of India (ICAI). Since that scorching indictment of the ICAI, the government has moved slowly but relentlessly to tell the CAs of their transgressions and the old boys club that the ICAI had become over the years.
In the United States, the Enron Financial scandal was enough to bring the shutters down on Arthur Andersen and Company. That’s how ruthlessly tough regulators were in that country. A milder form of that toughness is now evident in the Indian marketplace.
The problem, however, is the inordinate delay taken by the justice system to deliver its verdict. Take the Satyam scam for example. Its timeline is telling:
• The Satyam scandal was India’s biggest accounting fraud when it was unearthed in January 2009.
• Handled by the SFIO, it submitted a report in April that year that pointed towards the falsification of accounts. It was outlined that two Price Waterhouse auditors were part of the cover-up.
• The Supreme Court asked that the trial in the matter be completed by July 31, 2011.
• The special CBI court’s final verdict came six years after the fraud on April 9, 2015,
This story is from the July 2019 edition of Legal Notes.
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This story is from the July 2019 edition of Legal Notes.
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