|Tuesday, 20 December 2011 00:00|
Companies Bill looks at up to 10 years imprisonment for auditors found helping managements cook books
Take any big corporate scam, whether in India or overseas, and the auditors have a role to play, of omission if not of commission. The problem, however, has been that with few meaningful penalties given, in India at least, the auditing community has got away lightly. While Satyam’s foreign investors got $22.5mn as compensation due to the auditor’s negligence as a result of a suit brought by the US SEC for “failing to comply with some of the most elementary auditing standards and procedures”, the action in India has been limited.
Which is why the provisions of the new Companies Bill are important. The Bill says that if it is proved that the partner or partners of an audit firm have acted in a fraudulent manner, or colluded with the management to cook the books, both the audit firm and its partners will be liable for punishment. And the punishment, the Bill says, are a prison sentence that can go up to 10 years and a fine up to three times the size of the fraud. If only Parliament would pass the Bill—the fact that the new National Company Law Tribunal will be empowered to deal with such cases, presumably speedily, should go a long way in making auditors accountable.