ICAI bats for whistle-blowers

A YEAR after the Satyam scam,accounting regulator Institute of Chartered Accountants of India (ICAI) has recommended setting up a whistle-blower system within all audit firms.The decision follows instances of auditors being denied access to proper financial records by clients.A whistle-blower system entails establishing a mechanism for staff to report concerns about unethical behaviour,actual or suspected fraud or violations,directly to the management.
This will bring the ICAI on a direct information chain about the discrepancies as and when they take place.Also,we would be able to take prompt action if any manipulative practices are followed by companies, said an ICAI official,requesting anonymity.The ICAIs high-powered committee on the Satyam case found that members of the audit team of the erstwhile Satyam did not have full access to financials.
The discrepancies could have been unearthed much earlier if these malpractices were reported.The proposed system may give the regulator access to ground discrepancies much before they emerge as big defaults,the official said.The limited access to Oracle Financials was clearly with an attempt to conceal material facts from the auditors, the official added.
Oracle Finanicials was the software used by Satyam Computers to maintain its financial information.The regulatory body has also suggested that that private companies should be forced to pool in the services of more than one audit firm,so that there can be a check on the activities.This would be dependant on the size of the company,and registration of firms with identical names will not be allowed, the official said.Currently,an audit team has multiple chartered accountants on board,and ICAI feels that the proposed whistle-blower system will give it information on ground level manipulations that are carried on by the company management.
ICAI has further recommended that tie-up of foreign auditing firms with Indian partners should be looked into.There needs to be greater responsibility fixed upon not only the auditing firm but also the umbrella organisation,whose brand is being used, the official said.Currently,foreign auditing firms such as PWC,KPMG,Ernst & Young offer their services in India through direct tie-up with local firms.