ICAI to scrutinize firms witnessing resignation of ind directors

The Institute of Chartered Accountants of India (ICAI), the apex body to regulate the profession of chartered accountants (CA) in India, is planning to scrutinize the accounts of companies where independent directors have quit in the last two months.

"This decision was taken in our Financial Review Reporting Board (FRRB) and it would depend on the situation under which independent directors would have quit," said Uttam Prakash Agarwal, president of ICAI.

The decision comes in the background of Rs 7,000 crore corporate fraud at Satyam Computer Services. Independent directors had quit the Hyderabad-based software services firm after a failed attempt to acquire two companies that were related to Satyam’s promoter, B Ramalinga Raju. Many independent directors in other firms had also resigned from their board positions in recent months.

"It is possible that the independent directors might have left on account of personal reasons or due to some other reasons, but if any director had left intentionally and he was aware of any wrongdoing then the matter would be reported to the regulator concerned," added Agarwal.

Additionally, FRRB has also decided to review 100 companies of the financial year 2007-08 along with completion of the review of 64 pending cases.

FRRB randomly selects listed companies and scrutinizes the auditors report whether the prescribed procedures were followed. Based on their finding, FRRB is entrusted with powers to take suo-motu action against the auditor.

In order to expedite the reviewing process, ICAI has proposed to form 20 Financial Reporting Review Groups in 2009-10. Further the institute is setting up another review board that will cover unlisted firms also including state-owned companies.