NEW DELHI: In the aftermath of the Rs 11,400-crore Punjab National Bank (PNB) fraud, the finance ministry is planning to create a National Financial Reporting Authority, which will work as a regulatory body for accountants (CAs) and audit firms with a power to penalise them for their misconduct.
“The government is seriously concerned about the role of auditors in various cases. There is a need to improve the standard for financial auditing. So there is thinking on creating a centralised authority, which will regulate the auditors and will be invested with powers to penalise the erring auditors,” said a senior finance ministry official.
According to ministry sources, this will supersede the Institute of Chartered Accountants of India (ICAI) and Financial Reporting Review Board (FRRB) and the government is not happy with the role of both bodies in this scam.
The mood of the government became apparent when Finance Minister Arun Jaitley lashed out at auditors in his first reaction to the scam.
“What were the auditors doing? If both internal and external auditors have looked the other way and failed to detect, then I think CA professionals must introspect. Supervisory agencies also must introspect what are the additional mechanisms they have to put in place,” Jaitley said.
On their part, ICAI President Naveen N D Gupta had said that FRRB has been advised to initiate suo motu review of Punjab National Bank and Gitanjali Gems, but the ministry feels the action was “too little and too late”.
“And, stray cases are nipped in the bud and an example be made out of people that these bad examples itself are never to be repeated,” Jaitley said.
The finance ministry is also of the opinion that the present provision of penalty of Rs 1 lakh is too less. Also, under Section 132, there is provision for suspending corrupt officials for a period of six months to 10 years, which is rarely excercised and this encourages auditors to look the other way.
“Both CAs and auditing firms need to take their jobs very seriously. So, the plan is to make penalty much higher and punishment stricter so that they are more accountable,” the official added.