of India (ICAI) is continuing to investigate ways to strengthen the
audit profession in India, following the Satyam Computer Services
scandal where financial irregularities totalling about $1.44
billion were revealed at the software company. The institute,
responsible for regulating the profession in India, is also
determined to vigorously defend the reputation of local
auditors.
Satyam’s audit firm,
PricewaterhouseCoopers (PwC) member Price Waterhouse, and the audit
engagement partners are under investigation for failing for several
years to detect the fraud. The ICAI is pushing for measures such as
auditor rotation, joint audit and withdrawal of bank managers’
autonomy in order to boost the independence of auditors.
ICAI president Uttam Agarwal met with the
Indian Comptroller and Auditor General Commercial, Praveen
Tripathi, this month to seek support for influencing other
regulators such as the Reserve Bank of India and the Securities and
Exchange Board of India to push these measures. According to the
ICAI, Tripathi fully supported the institute’s efforts.
The institute has also, at the request of the
Ministry of Corporate Affairs, formed a committee to report on
issues including the operation of multinational accounting firms in
India, their links with Indian firms, the rotation of auditors, the
role of audit committees, the role of independent directors and the
process of granting practice rights. A report was due to be
delivered to the ministry on 10 March to assist it finalise changes
to the Chartered Accountants Act and regulations.
The ICAI is also working hard to mitigate any
impact the scandal has had on the public perception of the audit
profession.
In a speech at a council meeting this month
Agarwal said that as regulator of the chartered accountants in
India, it is the ICAI’s responsibility to ensure the auditing
profession is not questioned unless “any material fact or guilt of
member comes on record”.
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By GlobalDataThe institute’s Perspective Planning Committee
has suggested advertisements should be released highlighting the
role of ICAI and the profession in development of nation. This is
based on actions taken by American Institute of Certified Public
Accountants after the Enron fraud scandal.
Meanwhile, Price Waterhouse is to set up an
independent review board to provide external guidance on the firm’s
audit quality as Indian authorities continue their investigation of
the firm’s former audit partners. The board will be made up of four
members from outside PwC and a senior partner from another PwC
firm.
Price Waterhouse chairman Ramesh Rajan said
while he was confident in the overall quality of the firm’s
services and its staff, the problems at Satyam have created a
difficult environment.
As part of the review process, the firm has
appointed a new head of quality assurance and risk management, who
has been seconded from another PwC firm. In addition, Sharmila
Karve is to take over as the new leader of its national assurance
practice.
