oppn parties Accounting Scandals Keep Tumbling Out

News Snippets

  • SC will examine whether a ban should be put in place to prevent tainted politicians from contesting elections
  • RBI governor Shaktikanta Das says there are limitations on monetary policy and the economy needs structural reforms to spur growth
  • Centre, citing the gravity of the crime, assigns the Elgar Parishad case to the NIA to preempt the Maharashtra government from handing it over to SIT to be formed for the purpose
  • Billionaire investor George Soros says in his speech at Davos that Prime Minister Modi is creating a Hindu nationalist state
  • IMF chief Kritalina Georgieva says growth slump in India is temporary and momentum will improve going ahead
  • CJI S A Bobde says excessive taxation is a form of social injustice
  • Nitish Kumar says senior JD(U) leader and former bureaucrat Pavan Varma is free to leave the party after he criticizes the party's alliance with the BJP in Delhi
  • The government approaches the Supreme Court to fix a 7-day deadline for filing of mercy pleas by death row convicts
  • SC reinstates the woman staffer who accused former CJI Ranjan Gogoi of sexual harassment
  • Anupam Kher and Nasseruddin Shah clash over politics. Shah calls him "a clown" while Kher says Shah is a habitual critic of famous people
  • More than 100 Muslim clerics meet Maharashtra CM Uddhav Thackeray and demand that the state assembly pass a resolution against the CAA and does not implement it in the state
  • BJP calls the Congress "Muslim League Congress"
  • USA says Pakistan has limited options on J&K
  • India rejects US President Donald Trump's mediation in J&K
  • India plunges 10 spots on democracy index, now at 51st place
India beat New Zealand by 4 wickets in the first T20
oppn parties
Accounting Scandals Keep Tumbling Out

By Sunil Garodia

About the Author

Sunil Garodia Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Writes for a number of publications.

The chartered accountancy profession in India is passing through troubled times. With the regulatory body, Institute of Chartered Accountants of India (ICAI), acting like a spineless and mute spectator, the reputation of most accounting firms, including the big four, is taking a severe beating as audit scandals come tumbling out of the cupboard.

PwC had to endure a two-year ban as it 'failed' to detect the fraud in the books of Satyam Computer Services. More recently, Ernst and Young were suspended from bank audits as they 'failed' to detect the Yes Bank fraud. Now, the Enforcement Directorate has summoned executives of Deloitte and BSR & Associates (they work for KPMG in India) for the multiple frauds detected in IL& FS scam.

There is a growing perception in financial circles that these are not 'failures'. Experienced auditors like PwC, Ernst & Young, Deloitte & KPMG can point out cooked-up books in a flash. It is being alleged that auditors are colluding with managements to allow cooking-up of books. Auditors are turning a blind eye to accounting malpractices being indulged into by companies. From allowing concealment of losses and related-party transactions to ignoring fund diversion and even leaking insider information, accounting firms stand accused of unethical behaviour of all kinds.

The big four accounting firms have a firm grip on the profession all over the world. In India, they audit more than 70 percent of the big companies including groups like Tata. Since the government wants foreign investments to flow to India, it needs the backing of these audit firms. Hence, it has till now gone soft on them, despite their involvement in big-ticket scandals abroad and an increasing number of scandals in India. But with more and more scandals emerging, SEBI and the Serious Fraud Investigation Office, along with the ED, are examining the role of these auditors with a fine toothcomb.

The problem is that the profession in India is dominated by small players (audit firms with less than 5 partners) and they do not have the wherewithal to take on these global giants. Most Indian firms are also not interested in joining hands and merging to form a big firm to take on these giants, here and in other countries too. In fact, some of them are more interested to get the work palmed off by these giants in sub-contract. The ICAI is also dominated by these small players and they are more interested in retaining their turf rather than bringing discipline in the profession or ensuring that members perform their duties honestly and ethically. The National Financial Reporting Authority (NFRA), established with much fanfare in the aftermath of the Satyam scandal, remains a moribund body. Since the ICAI is either unwilling or unable to play the desired role in regulating the profession, the government must activate the NFRA, provide it with the required infrastructure and give it powers to ensure that audit firms maintain ethical standards and report all issues, even the smallest ones, with due diligence.

Pic courtesy: big4accountingfirms.com