Crackdown on auditing lapses tightens noose around India’s Big Four

Things moved a bit when the Global Trust Bank issue emerged, and the pace picked up following the Satyam accounting scandal.
For representational purposes (Photo | EPS)
For representational purposes (Photo | EPS)

HYDERABAD: The going is getting tougher for India’s Big Four auditors — Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers — as the government and regulators attempt to tear up auditing lapses by the roots.

In an unprecedented move, the Ministry of Corporate Affairs moved the National Company Law Tribunal (NCLT) on Monday seeking a five-year auditing ban on Deloitte Haskins & Sells and BSR & Associates, KPMG’s local affiliate, for alleged lapses in the accounts of ILF&S Financial Services and group firms.

It’s unclear if the accounting regulator Institute of Chartered Accountants of India’s (ICAI) Disciplinary Committee will take up the matter to initiate its own enquiry on both the auditors and audit firms.

The move comes just days after the RBI banned EY’s local arm SR Batliboi & Co from auditing the books of commercial banks for one year, forcing several lenders such as HDFC, Kotak Mahindra Bank and Bandhan Bank to replace the statutory auditors.

Incidentally, it’s also the first time in recent years that the central bank not only found lapses by an audit firm, but also penalised heavily barring the entity for 12 months.

Just last month, the Big Four took serious regulatory stick when the Bar Council of Delhi banned them from providing legal services, citing grounds of conflict of interest.

“It’s time regulation by ICAI becomes stringent and faster.

Things moved a bit when the Global Trust Bank issue emerged, and the pace picked up following the Satyam accounting scandal. However, ICAI’s disciplinary committees need to become much more robust,” a chartered accountant with a telecom operator told Express.

For instance, during FY18, of the 217 cases considered by the Council under Section 21 for its prima facie opinion as to whether the case warranted reference to Disciplinary Committee or not, only 30 were concluded and awarded punishment, while a majority continued to be under review.

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