SC directs Centre to put in place oversight mechanism of auditing firms

SC directs Centre to put in place oversight mechanism of auditing firms

The Supreme Court on Friday asked the Centre to put in place an oversight mechanism for auditing firms and also consider framing a law to regulate the profession.

A bench of Justices Adarsh Kumar Goel and U U Lait said the accounting firms could not be left to self-regulate themselves and a separate oversight body for auditing work and updating existing legal framework appeared to be necessary.

"Safeguards in the society and economy of the country in the process are of paramount importance. Needless to say, that absence of adequate oversight mechanism has the potential of infringing public interest and rule of law. The auditing profession requires proper oversight and such oversight mechanism needs to be revisited from time to time," the court said.

Stressing that "unchecked auditing bodies can adversely affect the economy of the country", the court told the Central government to set up within two months an expert committee to thoroughly examine the issues pertaining to "violation of RBI, FDI policies and the CA Act by secret arrangements".

Such a committee would submit its report within three months and the government could then take remedial measures, it said.

The top court passed its directions in its  judgement  on a PIL filed by advocate Prashant Bhushan on behalf of NGO Centre for Public Interest Litigation, alleging malpractices by leading MNC auditor PricewaterhouseCoopers (PwC).

The auditing firm, PwC and its network firms were accused of infusing foreign money in violation of the FDI norms, engaging in illegal accounting insurance policies and irregularity in an intra-network acquisition of another auditing firm.

Though PwC denied all charges, the court  said: "A case is made out for examination not only by ED and further examination by the ICAI but also by the central government having regard to the issues of violation of RBI/FDI policies and the CA Act by secret arrangements."

The court directed the Enforcement Directorate to complete the pending investigation in three months about the receipts from the foreign firm between 2008 and 2011and its implications.

It also asked the Institute of Chartered Accountants of India to take necessary steps for upholding ethics and values of the profession instead of citing its limitations based on technicalities.

Liked the story?

  • 0

    Happy
  • 0

    Amused
  • 0

    Sad
  • 0

    Frustrated
  • 0

    Angry