The Institute of Chartered Accountants of India (ICAI) has initiated investigation into the role played by Price Waterhouse — the statutory auditor for the Hyderabad-based software services firm Satyam Computer Services — on a ‘suo motto’ basis ie based on information available in the public domain. The institute, which regulates the chartered accounting profession in India, has powers to revoke the practicing licence of its members in addition to a maximum fine of Rs 5 lakh. "It is a very serious issue and we are examining it on a high priority and strict action would be taken against auditors if found guilty," said ICAI President Ved Jain. If found guilty of professional misconduct, the auditors stand to lose their practice licences," he added.
Under IPC, any person party to a fraud or cheating can be convicted and can be booked under the Companies Act and the Chartered Accountants Act. "In case of negligence by the chartered accountant, ICAI has the provision of invoking a severe penalty such as withdrawing the practice licence from a few months to lifetime," Jain added. The ICAI disciplinary committee has the right to suspend the membership and withdraw the licence. It can also levy a fine of up to Rs 5 lakh depending on the gravity of the misdeed. For the moment, the disciplinary committee of ICAI would collect facts and information to nail down the auditors (Price Waterhouse in this case) involved in the financial fraud before sending a showcause notice to Satyam.
"It is an exceptional case driven by greed," said Jain on being asked if ICAI standards were followed by auditors. "We have learnt of the disclosure made by the chairman of Satyam Computer Services and are currently examining the contents of the statement. We are not commenting further on this subject due to issues of client confidentiality," PwC said in a press statement issued late evening.
However, another senior member of ICAI said that it was too early to pinpoint blame on the auditors and added that the book of accounts is a primary responsibility of the management and auditors merely audit the documents provided to them by the management and give their opinion based on accounts.
On the other hand, Institute of Company Secretaries of India (ICSI), which has so far remained an observer in this whole episode, said it does not have powers to investigate, but would take action if its members are found guilty.
"The company secretary has to act as an advisor to the board. As far as the affairs of Satyam are concerned, to what extent the company secretary was aware about the developments, and if he was aware, what advise did he give to the board is a matter of examination. The institute of company secretaries of India cannot investigate the affairs of any company," said Keyoor Bakshi, president of the Institute of Company Secretaries of India (ICSI).
However, he added that they would wait for concrete information on the role of ICSI members. And if it is found that the member is guilty of professional or other misconduct, ICSI can proceed to disciplinary actions under the provisions of the Company Secretaries Act. The Act provides for disciplinary mechanism, and the punishment can be suspension of membership depending upon the nature of misconduct, added Bakshi.
According to the Companies Act, auditors should be appointed by shareholders in companies' AGM, however, in most cases most shareholders are not even aware as to who their auditors are because it is the management, which is appointing them, informs the ICAI member.
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