INDIA is turning out to be a jinxed destination for the Big Four
audit firms. After Price Waterhouse and Ernst & Young, which burnt
their fingers in the Satyam affair, it's the turn of audit firm
Deloitte to face the heat over its audit of collapsed retail firm
Subhiksha.
Deloitte, which refused to speak to ET citing client
confidentiality, is the statutory auditor of Subhiksha, but has not
been able to prepare the accounts for the past 22 months.
Renuka Ramnath, MD & CEO of ICICI Venture, which holds 23% stake
in Subhiksha, claims that Deloitte was not given the books of
account by the management led by R Subramanian. As a result, the
shareholders received the last audited accounts only in March 2007.
However, according to Section 227 of the Companies Act, 1956, the
auditor has the power to access at all times a company's books and
accounts, and vouchers, whether kept at the head office or
elsewhere. Besides, the Section states that the auditor can seek
information and an explanation it thinks is necessary from a
company.
A former office bearer of the Indian Chartered Accountants of
India (ICAI) told ET that Deloitte could have simply resigned from
the account if it had not been given access to the books in a given
financial year. "The auditor needs to explain to the shareholders
why it is still hanging on to the account despite not having been
given access to the books," the official said.
The problem, the official elaborated, stemmed from the very high
remuneration in terms of fees that multinational audit firms
received from big clients. "Thanks to the high amount of fees they
are paid, firms succumb to pressure by clients and are found wanting
on certain counts."
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