Apropos the editorial, “Watchdog for accountants” (July 26), despite the multiplicity of checks and controls, banking trade and commerce are not free from fraud. Tax evaders
are finding new ways to avoid paying taxes. Shell companies are playing an active role in this.
Accounting frauds cannot take place without the connivance of accountants. Consequently, it leads to significant erosion in the wealth of investors.
Banks are taking account of non-performing assets and periodic checking and auditing are being done to ensure that the quality of the assets have been determined according to the guidelines of the government and the banking regulator. Despite this, during inspection Reserve Bank of India officials point out glaring divergence in asset classification and income recognition. This indicates that the audited financial statements of banks do not show the true picture of their financial position.
Divergence in asset quality will reduce investors' appetite to invest in banks. Lack of transparency will distance depositors from banks, too. This will negatively impact resource mobilisation.
In such a situation, the proposal to establish the National Financial Reporting Authority is a welcome step. It will pave the way for keeping vigil on the actions of chartered accountants, help investors regain confidence and ensure more capital inflows.
V S K Pillai Changanacherry
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