ICAI begins scanning books of cos seeing director resignations

ICAI begins scanning books of cos seeing director resignations
The Hindu Business Line, April 7, 2009, Page 5

Eye on ‘intention’ behind quitting; to seek more powers for auditors.

Shashi Ashiwal

Mr Uttam Prakash Agarwal, President, Institute of Chartered Accountants of India, addressing a press meet in Mumbai on Monday. —

Our Bureau

Mumbai, April 6 The Institute of Chartered Accountants of India (ICAI) has initiated the process of scrutinising the accounts of companies that have seen an exodus of independent directors post-Satyam.

“More than anything else, the intention behind the quitting of the independent directors would be looked into,” the ICAI President, Mr Uttam Prakash Agarwal, told newspersons on the sidelines of a press meet here on Monday.

If the ICAI finds faults in the company’s numbers, it will write to the regulator, Mr Agarwal said, adding that the entire process will be financed by the institution itself.

ICAI was set up by an Act of Parliament; it is the apex body of chartered accountants in India.

After the Rs 7,000-crore fraud at Satyam came to light, more than 75 companies had reported the resignation of their directors, many of them independent ones. Separately, the ICAI is planning to seek more powers for auditors.

If the auditors find serious discrepancy in a company’s financial numbers, they should be empowered to call for restatement of accounts (by the company management), said Mr Agarwal.

Auditors’ notes

As per existing stipulations, auditors capture their observations about a company’s financials under ‘auditors notes’; they do not have powers to ask the company management to restate the accounts. A committee set up by the ICAI had recently interrogated Satyam’s ex-Chief Financial Officer, Mr Vadlamani Srinivasa, ex-Price Waterhouse auditors, Mr S. Gopalakrishnan and Mr Srinivas Talluri.

Satyam’s ex-chairman, Mr Ramalinga Raju, was forced to confess the fraud after investment banker DSP Merrill Lynch — which was hired by the Hyderabad-based company to evaluate various stake sale opportunities — found discrepancies in the company’s financials, Mr Vadlamani had told the committee.

Satyam had hired DSP Meril Lynch after the company had announced the possible dilution of stake by Mr Raju, following the failed bid to acquire Maytas Infrastructure and Maytas Properties.

Mr Vadlamani has said that neither the auditors nor the independent directors were aware of the scam, according to Mr Agarwal. “The ex-CFO also mentioned that no pecuniary benefits were derived by the auditors and that it was not true that the auditors had confessed to their alleged role, as was reported earlier in the media,” said Mr Agarwal.