ICAI pulls up three firms even as govt moves to strip it of its powers

While the government is working to make the National Financial Reporting Authority (NFRA) functional, which will take away the Institute of Chartered Accountants of India’s (ICAI’s) powers, the CA body has upped the ante by investigating books of three listed entities. In a letter to the Ministry of Corporate Affairs, the ICAI has mentioned “three listed companies” with discrepancies in the books, holding their auditors responsible. The ICAI raised this as a concern. Business Standard has reviewed the letter addressed to the corporate affairs secretary.

Once the NFRA starts investigating cases against listed entities and big unlisted corporates, the ICAI will lose the power to look into these companies and their auditors. The newly constituted NFRA has the powers to pull up the auditing firms as well. Currently, only individual auditors can be hauled up.

The NFRA was set up by the government so that an independent authority investigates the role of the auditor in the case of misreporting of financials. However, all members have not been recruited.

Meanwhile, the Infrastructure Leasing & Financial Services (IL&FS) fraud is also being investigated by the institute to trace the role of the auditors. Notices had been issued to the auditors of the company. The institute also claimed that despite its efforts to get information from the Serious Fraud Investigation Office (SFIO) on the IL&FS matter, there was no response from the ministry and the SFIO.

The ICAI has written to Prime Minister Narendra Modi, saying SFIO was not co-operating with it in the IL&FS probe. It also alleged the SFIO did not give it information when CAs were allegedly helping shell companies at the time of demonetisation. Senior officials in the government, who have been looking into the IL&FS matter, said the ICAI is supposed to help investigative agencies instead of it being the other way round. There are around 1,000 cases against auditors pending with the ICAI.