Accounting and Business, April 2013
After suffering its biggest ever corporate fraud, India has responded with a new Companies Bill that will impose stricter regulation on auditors
After suffering its biggest ever corporate fraud, India has responded with a new Companies Bill that will impose stricter regulation on auditors
India’s auditors have had a difficult time in the court of
public opinion since the revelations of the US$1bn Satyam Computer Services
scandal in 2009, when the company’s chairman admitted the books had been
cooked. The new Companies Bill might change that – although it will also
inflict some pain on the country’s auditors, forcing them to accept some tough
criminal penalties for dereliction of duty and at the same time imposing
professional restrictions that could cut their income. The bill passed the Lok
Sabha, the lower house of the country’s parliament in December last year, and
now awaits approval from the upper house and the president.
Scary Penalties
There are concerns in the profession about the bill.
Harinderjit Singh, a senior partner at Price Waterhouse India, says: ‘Imprisonment
for 10 years and a fine which is three times the amount involved in fraud is
very scary and that, too, with the due process not spelled out in the law.’
Indeed, critics to the bill worry that even a bona fide
mistake could be treated as a fraud, ‘Every time a financial statement is
overstated or understated, the basic presumption will be collusion between the management
and the auditors,’ says Amarjit Chopra, former president of Institute of
Chartered Accountants of India (ICAI).
…
Chopra: ‘Auditing hardly gives the bread; the butter comes
from other assignments. You may not give too much butter to somebody but you
have to provide some incentives.’…read more (on page 42).
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