Worried auditors say they will now read between lines

25 Jan 2009, 2015 hrs IST, Prabhakar Sinha, TNN

NEW DELHI: Indian auditors are nervous. For the first time an auditor has been detained by the police for failing to discharge his professional

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responsibility to ensurefinancial morality in a company. Several auditors TOI spoke to said the development represented a turning point for the auditing profession in India.

They felt auditors would now be extra cautious while going through a company’s books and there would be a big change in their attitude towards clients.

As the India head of a top audit firms put it: “In the past, the tendency was to trust the client’s documents unless there was specific reason for suspicion. Now, nobody will be willing to take the chance and insist on independent corroboration of accounts, wherever possible.”

Some said this detention was different and that the police believe the PwC auditors’ role went beyond just negligence in examining Satyam’s accounts.

“Unless the police believe that prima facie there is evidence of the auditors themselves have played a part in perpetrating the fraud, they could not have arrested them,” says Ved Jain, president of the Institute of Chartered Accountants of India.

Most auditors felt they would write directly to banks, suppliers, creditors and debtors to check if what the company claims matches with facts. While this is likely to add to the woes of auditors, investors are likely to be benefited by the greater stringency in auditing.