Time To Discipline Unethical Accountants
By Nantoo Banerjee
Prime Minister Narendra Modi will do a great service to the nation if he is able to put in place the National Financial Reporting Authority (NFRA) to rein in the Institute of Chartered Accountants of India (ICAI) for its perceived failure to enforce discipline. The prime minister is clearly upset with chartered accountants’ role in lack of corporate governance and financial misconduct of corrupt politicians, businessman and NGOs. While Companies Act 2013 provided for NFRA as a regulatory agency for audit, accounts and financial reporting, Section 132 of the law has remained on paper as the rules are yet to be notified. It seems some powerful, politically-connected ICAI members ICAI have been able to put the issue in cold storage for the last three years.
However, the issue is now simmering again especially after Prime Minister Narendra Modi publicly criticised ICAI’s disciplinary record last month. The prime minister pointed out that just around 25 auditors had faced action in over a decade while some 1,400 cases were pending. The government is serious about reopening the case for NFRA. The move comes at a time when the Enforcement Directorate (ED) filed a chargesheet against Rajesh Agarwal, RJD Chief Lalu Prasad Yadav’s daughter Misa Bharti’s chartered accountant, in connection with a money laundering case worth Rs 8,000 crore. The income-tax department had seized the properties of the RJD supremo, his daughter Misa Bharti, son-in-law Shailesh Kumar and son Tejashwi Yadav, and charged the four along with Lalu Prasad’s wife Rabri Devi under the Benami Transactions Act 1988. More properties of the family may be attached, as investigations progress. All these transactions would not have been possible without involvements of the family’s CA and also some of the government’s dishonest tax officials.
How trustworthy are accounting professionals? The latest Comptroller and Auditor General (CAG) report on telecom companies raises many questions. The CAG report claimed that six major telecom companies – Reliance Communications, Tata, Airtel, Vodafone, Idea and Aircel – had allegedly understated gross revenue of over Rs 46,000 crore for a period between 2006-07 and 2009-10 and denied the government its share of income which has been estimated at more than Rs 12,400 crore. The federal auditor has calculated the under-reporting of revenue based on actual earnings of the telecoms during the period as reflected in their books. The auditor is also believed to have slammed the department of telecom (DoT) for overlooking the irregularities and misreporting facts. Interestingly, CAG was prevented from auditing these telcos since 2009 when the private service providers moved different courts challenging the mandate of the government’s super auditor.