How They Make The Ledger Lie

- Ushinor Majumdar

The financially illiterate middle class may encounter chartered acc­ountants around the dreaded season of tax returns—as the self­ pit­ying definition goes, they are people we pay to tell us if we are broke and by how much. Auditors are higher up the angels’ hierarchy, known only to businesses. The hollywood caricature is of a bald head crowned with a visor, shirt­sleeves rolled up, digging into dusty, oversized registers, poring over data, crunching numbers, reading complex financial gobbledygook—the things that make many shudder is routine, even exciting, for these certified practition­ers of a modern black art.

But how and why does it matter to us…what these hifa­ lutin professionals get up to in their day jobs? Especially in their role as ‘statutory auditors’—as defined by comp­any laws—for big, medium and small corporations? Because it does. Because, as stockmarket regulator SEBI (Securities and Exchange Board of India) explained in the 2009 Satyam case, auditors have a “direct, fiduciary” relationship—that is, one of trust—with the sharehold­ers of the companies they audit. India has over three crore retail investors, and not only do they depend on the auditors to certify the internal health of companies, the auditors are supposed to work on their behalf.

Beyond that internal realm, the financial fate and trajectory of these companies can have larger implications on the economy. Remember only the “window­dressing” offered by top­notch auditors to Lehman Brothers before its collapse plunged the global economy into its worst recession since the 1930s—and the pain suffered by millions of people.