My dear professional colleagues,
This is my first communication from me to you all, after having taken over the reigns of the Institute yesterday as the 57th President of the Institute.
Through this communication of mine, I would like to touch upon the most burning issue which has confronted our profession ever since the disgraced Chairman of Satyam Computer Services Limited, Mr. B. Ramalinga Raju, made shocking revelations of serious irregularities and mis-statements in the balance sheets of the Company for the past several years. The fact as to whether the auditors were innocent, or whether they were negligent or in the worst case scenario, whether they were hand in glove with the Chairman in falsifying the accounts, will no doubt come out of the investigations/probe being done by several agencies, including the disciplinary mechanism of the Institute, but the fact remains that the profession has received a severe beating.
In that scenario, I feel it is important to bring to the notice of our members as to the consequent steps that their Institute has taken in the matter. Hence this communication.
1. The Director (Discipline) of the Institute took immediate cognizance of the matter and has issued show-cause notices to the auditors, viz. M/s Price Waterhouse, Bangalore, M/s Price Waterhouse, Kolkata and M/s Price Waterhouse, New Delhi vide letters respectively dated 10th January, 2009, 14th January, 2009 and 14th January, 2009.
2. Show-cause notices dated 14th January, 2009 have also been issued to Shri Vadlamani Srinivasu, ex-CFO and to Shri V.S. Prabhakara Gupta, ex-Sr. Vice President (Internal Audit), of the company.
3. Communications have been sent to the following authorities/agencies seeking relevant documents/details in their possession, for the purpose of examination:
(a) Ministry of Corporate Affairs
(b) Securities and Exchange Board of India
(c) Registrar of Companies, Hyderabad
(d) Shri Ram Mynampati, the then interim CEO of the company
(e) M/s Ernst & Young Pvt. Ltd., Secunderabad
(f) Shri Deepak Parekh, newly appointed Director of the company.
4. The Financial Reporting Review Board of the Institute, which has been constituted by the Council of the Institute about five years back, for review of General Purpose Financial Statements of enterprises and auditor's report thereon, with a view to improve financial reporting practices in the country, has commenced the task of review of financial statement of the company for the last five years. The Board has the mandate of the Council to be on the fast track mode.
5. The Council of the Institute met on 12th & 13th January, 2009 at New Delhi and took the following further decisions:
(a) To place in public domain by hosting on the website, the following:
(i) Details of members found guilty of severe/major offences, for which a punishment of removal of name from Register of Members for a period of five years and above has been awarded/recommended.
(ii) Information regarding firms with which such tainted Chartered Accountants are associated as on the date of occurrence of misconduct.
(b) To communicate the details at (i) and (ii) above to the regulatory authorities such as C&AG, RBI, SEBI, IRDA etc. and also to any authority/entity/public who wish to make use of the same, before engagement of any CA/firms.
(c) To constitute a High Powered Committee headed by the then Vice President to examine the entire gamut of Satyam fiasco in relation to accounting and auditing aspects including financial reporting requirements, helping/co-ordination with investigation being carried out by various agencies, going into the roots of the problem, identification of the root crisis, effectiveness of the system in place, systemic issues, and to suggest changes, wherever required, for the purpose of making appropriate recommendations to the Government, SEBI and other regulators. The seven-member Committee, which comprises of one member from each of the five Regions and two Government nominees, has already commenced its task.
It has held two meetings whereat it has crystallized its road map and also met the concerned regulators/key personnel in Ministry of Corporate affairs, Office of C&AG, Finance Ministry, SEBI, CRISIL, DSP Merrill Lynch, besides a Board Member of Satyam. Meanwhile, the Committee has received a number of suggestions from Honble members on the possible way forward for the Institute on the entire matter, which is being taken into consideration by the Committee.
The Institute is speedily working in the matter and would be submitting its report to the Council, whereafter the contents of the same would be brought into public domain. We are sanguine of repairing the damage caused to our profession by this incident, which we believe is only an aberration.
In this effort of ours, we draw strength from the support of our members.
CA. UTTAM PRAKASH AGARWAL
Date: 6th February, 2009.
My dear professional colleagues,