Companies bill 2011: audit firm accountable for fraud in co.

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COMPANIES BILL 2011: PRIVATE COMPANIES UNDER SEBI JURISDICTION & AUDIT FIRMS ACCOUNTABLE FOR FRAUD IN COMPANIES

 

Privately-held and unlisted companies will come under SEBI jurisdiction if they collect or propose to collect money through sale of shares from 50 and more individuals under Companies Bill 2011 , which is being formulated by Ministry of Corporate Affairs. The proposals are being incorporated on account of recent events like- Satyam Fraud and SEBI-Sahara Group fight over jurisdiction. There were also issues of tussle over jurisdiction between different regulators. For example RBI had  complained that while the current law — the Companies Act, 1956 — applied to banking companies only if its provisions were inconsistent with the Banking Companies Act, 1949 (now the Banking Regulation Act, 1949), such a clause was missing in the Companies Bill, 2009.

Second important clause regarding  proposal  that if the audit partner or partners of an audit firm  were proved to have acted in a fraudulent manner or abetted or colluded in any fraud by the company, its directors or officers, the audit firms would be equally liable for civil or criminal proceedings.

At present , the Institute of Chartered Accountants of India (ICAI) can bar the guilty auditors from doing auditing work for a specified period and also criminal proceeding can be initaited separately against auditors. However, no action could be taken against the firms, either under the ICAI Act or the Companies Act.

 

 

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