Freedom of firms to appoint,fix pay of auditors should be taken away,says ICAI

The autonomy to appoint auditors and fix their remuneration should be taken away from firms and entrusted to respective regulators so that trust...

The autonomy to appoint auditors and fix their remuneration should be taken away from firms and entrusted to respective regulators so that trust which has been badly hit in the aftermath of Satyam fiasco can be restored in auditors,the Institute of Chartered Accountants of India (ICAI) said today.

Autonomy to management for appointment of auditors should not be given to the firms,it should be given to the regulators… if you appoint an auditor,he may not go against you… remuneration also should not be decided by them, ICAI President Uttam Prakash Agarwal told The Indian Express.

He said the independence in appointment of auditors should not be given to the management of any firm as that creates complications for the auditors working in the firm. They have to work as per the managements order and this may constraint their freedom. He cited the examples of banks in the country saying that they were running fine because the auditors were appointed by Reserve Bank of India,and the remuneration was also decided by the banking regulator. Therefore,the government should work out a way that the appointment does not remain in the hands of managements. However,early this year,RBI had liberalised its norms and allowed banks to select their own auditors.

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The Satyam accounting fraud,which involved manipulation of a whopping Rs 7,800 crore,though perpetrated by the IT firms founder B Ramalinga Raju also involved auditors of the firm,as suggested by the Serious Fraud Investigation Office report. According to the report,the auditors kept silent despite knowing about the failure of the IT firms audit system in 2007. The SFIO,in its report,had alleged that the two PriceWaterhouse partners working on Satyam account S Gopalakrishnan and Talluri Srinivas were guilty of account falsification.

With regard to whether the institute was doing anything to make the norms more stringent for auditors,he said the punishments available in the Act are tough enough and there was no further need to tighten them.

On the developments in Satyam case,he said the institute has sent notices to the auditors and the matter has been referred to the disciplinary committee. The auditors have to file the reply within 30 days after which the proceedings of the committee would start. The institute is also reviewing the replies of various firms operating under the name of foreign entities like PriceWaterhouseCoopers. Agarwal said the institute has received almost 70 per cent replies and details are being compiled. Any opinion on the issue would be formed by the institute only after receiving all the information,he added.