Indian FIs Pitch for Auditor Rotation
The Economic Times, January 29, 2009, p1
Abhinaba Das & Dev Chatterjee, ET Bureau
MUMBAI: Weeks after the Satyam saga exposed glaring lapses in auditing practices, Indian institutional investors are seeking a rotation of auditors to ensure that auditors don’t act in “collusion” with the company promoters.
The biggest local investor, Life Insurance Corporation, and the state-owned reinsurance firm, General Insurance Corporation, are asking companies, where they have significant stakes, to change their statutory auditors every three years to plug possible loopholes in the audit process. A directive to this effect is being sent out to the companies concerned.
“We are hopeful that rotation of auditors will help in preventing audit scams. The Satyam fiasco has been a big learning experience for all of us and we feel it’s time that companies change auditors periodically,” a senior insurance official told ET.
Price Waterhouse, the audit arm of PricewaterhouseCoopers, has come under the scanner after Satyam Computer Services promoter B Ramalinga Raju admitted to fudging the company’s accounts for several years. Price Waterhouse, which was the auditor for Satyam, has already sacked its two auditors S Gopalakrishnan and Srinivas Talluri, who are now in a Hyderabad jail, for signing the annual accounts which were based on forged documents. Price Waterhouse has also suspended the two partners.
With institutional investors making their stand clear, pressure will now mount on the Institute of Chartered Accountants of India (ICAI), the self-regulatory body for practising chartered accountants, to come out with guidelines to make rotation of auditors mandatory. At present, only banks are required to rotate auditors, appointed from among RBI-empanelled list of audit firms.
The official said many Indian companies retain their auditors for years, which results in “collusion” between the promoters and the bookkeepers.
Investor confidence in auditors has hit an all-time low following apprehensions that many accounting firms don’t do proper due diligence before vetting their clients’ financials. India Inc has been debating the issue of rotation of auditors for quite some time.
“Two years ago, there was a plan to effect rotation of auditors. But no action was taken,” a former ICAI office-bearer told ET, asking not to be quoted. Several calls made to ICAI president Ved Jain went unanswered.
The Economic Times, January 29, 2009, p1
Abhinaba Das & Dev Chatterjee, ET Bureau
MUMBAI: Weeks after the Satyam saga exposed glaring lapses in auditing practices, Indian institutional investors are seeking a rotation of auditors to ensure that auditors don’t act in “collusion” with the company promoters.
The biggest local investor, Life Insurance Corporation, and the state-owned reinsurance firm, General Insurance Corporation, are asking companies, where they have significant stakes, to change their statutory auditors every three years to plug possible loopholes in the audit process. A directive to this effect is being sent out to the companies concerned.
“We are hopeful that rotation of auditors will help in preventing audit scams. The Satyam fiasco has been a big learning experience for all of us and we feel it’s time that companies change auditors periodically,” a senior insurance official told ET.
Price Waterhouse, the audit arm of PricewaterhouseCoopers, has come under the scanner after Satyam Computer Services promoter B Ramalinga Raju admitted to fudging the company’s accounts for several years. Price Waterhouse, which was the auditor for Satyam, has already sacked its two auditors S Gopalakrishnan and Srinivas Talluri, who are now in a Hyderabad jail, for signing the annual accounts which were based on forged documents. Price Waterhouse has also suspended the two partners.
With institutional investors making their stand clear, pressure will now mount on the Institute of Chartered Accountants of India (ICAI), the self-regulatory body for practising chartered accountants, to come out with guidelines to make rotation of auditors mandatory. At present, only banks are required to rotate auditors, appointed from among RBI-empanelled list of audit firms.
The official said many Indian companies retain their auditors for years, which results in “collusion” between the promoters and the bookkeepers.
Investor confidence in auditors has hit an all-time low following apprehensions that many accounting firms don’t do proper due diligence before vetting their clients’ financials. India Inc has been debating the issue of rotation of auditors for quite some time.
“Two years ago, there was a plan to effect rotation of auditors. But no action was taken,” a former ICAI office-bearer told ET, asking not to be quoted. Several calls made to ICAI president Ved Jain went unanswered.
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