‘Audit firms need to be put under lens’
10 April 2015
As a special court sentenced B Ramalinga Raju, chairman of erstwhile Satyam Computers, to 7 years in jail along with a Rs 5 crore penalty and holding two former partners of its auditing firm Price Waterhouse accountable in the fraud case, regulatory officials, who were involved with the case, said that accounting firms should also be held accountable.
“Nothing has happened to the audit firm because, in India, while institutions have disciplinary powers over individuals, they can do nothing to the firm and this needs to be looked into. In developed nations accounting firms have been held accountable,” said a former Sebi official. He added: how can the firm justify the fact that the auditor did not raise issues even as accounts were manipulated for 28 quarters?Another former regulatory official said that it should not be looked just from the prism of the Rs 7,800 crore fraud amount as, in this case, it is not that someone took that money from someone.
“The promoters were falsifying the accounts and then they were pledging the shares on the basis of the false publicity,” said the official. While investors in the US get compensated because of the Class Action Suit clause available there, domestic investors who lost money because of the manipulation in the accounts have not got any relief. The official also expressed concerns on the time taken by judicial system in India in establishing a case in an economic offence of this magnitude.