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DCA functioning `leaves much to be desired'

Our Bureau

NEW DELHI, Dec. 19

THE Joint Parliamentary Committee (JPC) on stock scam has called for further investigations in regard to transfer of funds by six corporate groups to Ketan Parekh even as it came down heavily on the quality of inspections carried out by the Department of Company Affairs (DCA).

The department had informed the panel that six out of 10 corporate groups, which transferred huge amounts to entities associated with Ketan Parekh, have not violated the provisions of the Companies Act. The committee felt that more investigations were needed on this aspect.

The committee also said that the regional directors and the Registrar of Companies should benefit from their presence on the governing board of stock exchanges and initiate investigation when abnormal fluctuations in the price of a scrip is noticed.

Further, on the quality of inspection by the department the panel said that, "it leaves much to be desired. It is a matter of serious concern that the DCA inspectors are untrained and unable to cope with the quality of inspection." The committee hoped that the weakness in the system of inspection would be looked into and remedial action taken without delay in order to have an effective inspection mechanism.

It also expressed that the issue of auditor-management relationship needs to be addressed with a view to ensuring a healthy professional relationship between them. "This could be achieved through rotation of auditors, restriction on non-audit fee etc.," it said.

The panel urged that the Naresh Chandra Committee examining the entire gamut of issues pertaining to auditor-company relationship should complete its work within a time frame and enable expeditious action by the Government on its recommendations. The "desirability of having an arrangement in DCA for scrutiny of auditors' reports of all companies on regular basis needs to be examined with a view to taking suitable action on the qualifications made by auditors in their reports."

Further, the panel was not convinced with the department's explanation attributing the lengthy disciplinary procedure followed by the Institute of Chartered Accountants of India (ICAI) as the reason for delay in taking action against auditing entities named by the pervious JPC. It expressed unhappiness over the fact that the no decision has been taken by the department on the amendments proposed by the ICAI on the disciplinary matters, except for seeking a fresh set of proposals from the ICAI in 1994 and again in 2001.

"Given this background, the Committee said that it was not convinced by the Department's explanation. The Committee stressed that as proposed by the DCA, amendments to the Chartered Accountants Act should be brought before the Parliament in the ensuing session," it said.

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