Unitech, JP Associates looking at changing auditors

One firm believes the long tenure of the auditor at Unitech is a big concern and is advising its client to vote against it

Advisory services firms suggest investors vote against a resolution seeking the reappointment of the statutory auditors of two real estate firms, Unitech and Jaiprakash Associates, as they have been unchanged for several years. At their annual general meetings tomorrow, the two firms are slated to seek shareholders' approval for the reappointment of auditors.

While MP Singh and Associates has been Jaiprakash Associates’ statutory auditor for more than a decade, Goel Garg & Co has been Unitech’s statutory auditor for about 16 years.

“MP Singh and Associates has been the statutory auditor of the company since at least FY05 (eight years), based on data on the website. MP Singh has been the audit partner. However, we believe MP Singh and Associates has been the company’s auditors for more than 25 years, with MP Singh as the signing partner during the entire period,” said a advisory report by Stakeholders Empowerment Services (SES) on Jaiprakash Associates.

Another note by Institutional Investor Advisory Services (IiAS) on the Noida-based infrastructure and real estate firm added, “Taking into account auditors’ tenure of over 16 years and audit partners’ tenure of over 16 years, we recommend that shareholders vote against the proposal.” Unitech also hasn't changed its auditors for the last 16 years.

SES, founded by former Sebi executive director JN Gupta, believes the long tenure of the auditor at Unitech is a 'high concern' and is advising its client to vote against it tomorrow.

“Serving for longer tenor compromises independence and raises questions over the objectivity of the auditors and therefore is considered a poor corporate governance practice,” says a note by SES.

The Corporate Governance Voluntary Guidelines published by the Ministry of Corporate Affairs (MCA) in 2009 states that in order to maintain independence of auditors with a view to look at an issue (financial or non-financial) from a different perspective and to carry out the audit exercise with a fresh outlook, the company may rotate the audit firm once every five years and the audit partner once every three years.

 

 

 

 

 

 

 

 

The Companies Bill, which is likely to be tabled in Parliament later this year, proposes that the same audit firm cannot continue beyond 10 years.

 

 

 

 

 

 

 

 

 

Currently, it is commonplace among most large listed firms in India to have auditors unchanged even for several decades.