The Hindu Business Line : Satyam effect: ICAI decides on deterrent action against CA firms

New Delhi, Jan. 12 Chartered accountancy firms will have their names published on ICAI’s web site if any punishment meted out to their partners or members extends beyond five years.

This decision was taken by the central council of the Institute of Chartered Accountants of India (ICAI) at a specially convened meeting today to discuss the Satyam case.

This is the first time that ICAI is looking to take deterrent action against partnership firms instead of just the errant members. It is contended that once the names of the firms appear on the ICAI web site, the various regulators and the corporate sector would be reluctant to appoint such firms as external auditors.

Briefing reporters on today’s deliberations at the council meeting, the ICAI President, Mr Ved Jain, also said that a special committee would be set up to go into the root of the Satyam financial fraud and come up with corrective measures in respect of the legislation and rules governing the profession.

“The Central council expressed serious concern about the Satyam episode. It is a fraud committed by the management with the connivance of many people. We deliberated on how investor confidence on the Indian financial system can be restored”, Mr Jain said.

He also made it clear that Price Waterhouse had so far not submitted any working paper to the institute. “Except the notice sent by us to Price Waterhouse, there has been no other communication with the firm. They have 21 days to respond”, Mr Jain added.

Meanwhile, Price Waterhouse member, Mr S. Gopalakrishnan, who had signed financial statements of Satyam during financial year 2003 to financial year 2006, did not attend today’s central council meeting. The other Price Waterhouse member represented in the council — Mr Harinderjit Singh, attended the meeting, gave his viewpoints on the matter and walked out of the meeting, ICAI sources said.

Asked whether ICAI plans any interim action against Price Waterhouse, Mr Jain said that no interim action was contemplated as there was still no evidence before the institute that members of Price Waterhouse, as statutory auditor of Satyam, had a role in the financial bungling.

On bank auditors, the council has also decided to approach the Finance Ministry to ensure that the boards of public sector banks do not have the option to appoint auditors. “The RBI alone should appoint statutory auditors for the banks,” Mr Jain said.

He also said that private banks were appointing their own auditors and this situation needs to be changed. Even in the case of private sector banks, the RBI should appoint the statutory and branch auditors as lot of public interest is involved here, especially that of depositors.