The SC has asked for a tighter regulation on the auditing firms in the country. It has taken note of the problem of illegal activities of multinational accounting firms. A greater control of their activities has been necessitated.
A bench comprising of justices ALK Goel and Uday U Lalit said that accounting firms couldn’t be left to self-regulate themselves. The court has asked the central government to form a committee to examine issues regarding the violation of RBI, FDI policies and the CA Act. The committee will be expected to submit a report within three months so that the government can then take remedial measures. The bench highlighted the importance of overseeing the auditing mechanisms in the country to prevent infringement of law and in the best interest of the public.
The order came after a PIL was filed against the malpractices of PricewaterhouseCoopers (PwC). They were found violating FDI norms and were engaging in illegal accounting insurance policies and irregularity in an intra-network acquisition of another firm. Despite PwC refuting all the claims, the court still ordered an investigation by the ED, ICAI. The ED has been given three months to investigate the issue at hand.
The role of auditors is also being questioned in the PNB fraud case because of their inability to detect the 11,400 crore fraud. The order is also calling for steps to ensure the enforcement of the FDI policies and the Foreign Exchange Management Act, 1999. The job of the auditors said Vikamsey the former president of the ICAI was to lend credibility to financial statements that they conformed to the accounting standards and for detecting frauds. With all the scams floating around, it is necessary to take active measures, control both private and public firms and hold them accountable to the public or else one can rest assured that scams will continue to happen. The problem with the law is that there is always a loophole.