Goods And Service Tax India

The reaction of the firm of Chartered Accountants that signed the accounts of Satyam Computers was aired by CNBC TV18 channel around 7.30pm on 7th Jan 2009.

It is extremely saddening to hear that they refused to comment on the issue taking plea of client confidentiality.

Satyam is a public limited company with wide spread shareholding. A large number of individuals, employees, mutual funds, pension funds from across the globe are shareholders. And it is to these shareholders that the Auditors submit their reports.

Apart from the shareholders, other stakeholders including banks, suppliers, employees and clients depend upon the report of the Auditors to decide whether to undertake business dealings with the company or continue to be employed by the company.

It would have been understandable if the Auditors had affirmed that they have completed the audit in accordance with accepted auditing and assurence standards and norms; that they have taken their job seriously; that the audit had been professionally; that there has been no negligence on their part.

Sadly such assurances were missing in their reaction.

Can we then conclude that they have not done the audit professionally; that they have knowingly made a false declaration as to the truth and fairness of the accounts; that they were negligent?

It is for the Institute of Chartered Accountants of India [ICAI] to investigate this aspect of the fraud committed by Mr Ramalinga Raju. They must immediately form a team of investigators with powers to summon the chartered accountants who certified the accounts and verify their working papers. The team must be mandated to decide whether the audit was conducted in accordance with accepted auditing and assurance standards prescribed by ICAI and also find answers to the questions raised in the previous paragraphs.

The report of the investigators must be compiled expeditiously. The investigators must suggest changes in rules and regulations to make commission of such frauds more difficult. The report must be made available to the public for their comments and suggestions. The ICAI must then present a report to the Government of India with their suggestions for prevention of such frauds. And all this must be done with a short time frame.

The reaction of the ICAI is crucial and will decide the acceptability or otherwise of audits conducted by Indian Chartered Accountants. The profession has a duty to assure those who depend upon the audited accounts for decision making, that the accounts are “true and fair” as certified by them.

And speed is of essence here. The economy is already reeling under depression and companies are finding it difficult to raise funds from investors. many rights issues including that of tata Motors failed to interest the investors.

And frankly we did not need a financial scandal at this time.

Let us hope that the ICAI does a good job in identifying the causes of this fraud and come out with practical suggestions to prevent them in future. Also restore the confidence of the users of financial statements that the financial statements are true and fair.