CAs to check annual reports for mis-statement of facts

Imposing greater responsibility on chartered accountants to prevent Satyam-like frauds, the apex accounting body Institute of Chartered Accountants of India (ICAI) today introduced new guidelines making it mandatory for auditors to vet annual reports and other documents for "misstatement of facts".

"The Standard (on Auditing, SA 720) is a first of its kind... Issued by the Institute and requires the auditor to read such other information to identify any material inconsistencies vis-a-vis the audited financial statements, since these can undermine the credibility of financial statements and the audit report," the ICAI said in a release.

Besides, the ICAI has also tightened norms for obtaining and evaluating "audit evidence", on which the final audit findings are based.

Currently, CAs audit accounts of companies and verify the financial statements like the balance sheet and profit and loss account. They are not responsible for other statements appearing in annual reports.

The annual report, which is of immense importance to the stakeholders, contains lot of information that may or may not be related to the audited financial statements.

These changes are apparently in response to the Satyam fraud, which came to light after disclosure of Rs 7,800 crore accounting fraud by its founder Chairman B Ramalinga Raju.