Tuesday, January 22, 2013

Skeletons in every cupboard

Rather than blaming auditors, the entire regulatory system must be cleaned from top to bottom

Is regulation in India working? It’s a lot like asking whether the democracy is working in Pakistan! A lot has been said and written on the Satyam fiasco and from investors to independent directors to auditors, everybody seems to have got their share of the blame. But this is not for the first time that such a thing has happened in India. However, Raju’s misdemeanours have taken this ruckus to a new league and garnered the attention of the corporate world. We have been through this episode with Sterlite, which was alleged to have adopted fraudulent practices to bag a tender floated by GAIL last year. Then we have the case of Global Trust Bank, where the auditors were again PricewaterhouseCoopers and so on... In fact, Naresh Gupta, MD, Adobe India, in an conversation with B&E, doesn’t deny the possibility that many more Indian companies have bloated books (mostly in the real estate & infrastructure sectors) because of their proximity with politicians and bureaucrats. “So it’s better if we clean up the system now than to feel sorry later,” he adds.

But then isn’t it the auditor’s responsibility to be the whistle-blower to the company’s wrongdoings? However, some say that book of accounts is the primary responsibility of the management and auditors merely audit the documents provided to them by the management and give their opinion based on accounts. If so, then why on earth does someone need an independent, external auditor?

Source : IIPM Editorial, 2012.
An Initiative of IIPMMalay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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