image

Set up new agency to probe corporate accounting frauds by Government

The government will soon set up a specialised agency to investigate large corporate accounting frauds. It is keen to establish a robust mechanism for faster inquiries into scams .

The proposed agency is likely to examine accounting frauds of certain classes of listed companies or those of Rs 500 crore and more.

To be formed under the Companies Act provisions, the agency will be mandated to investigate auditing and accounting frauds.

The threshold for accounting frauds to be probed by the upcoming agency is likely to be Rs 500 crore and above. It could also probe frauds of certain classes of listed companies. “Currently, there’s a lack of specialisation required to probe complex accounting frauds. The agency will ensure swifter probes.”

First suggested in the aftermath of the Satyam fraud, in which the auditor was also implicated, the upcoming agency will have an overarching role to regulate chartered accountants as well as set standards. It will have forensic auditors on its panel as well.

At present, the Institute of Chartered Accountants of India (ICAI) has authority to investigate and take disciplinary action in cases in which an auditor is involved. Any fraud below the threshold set by the government could still be investigated by the professional association.

ICAI has requested the corporate affairs ministry to not dilute its authority. If the government is keen on setting up an authority, ICAI has suggested that this look at high-value accounting scams above a threshold of Rs 1,000 crore.

We have made a representation to the government that ICAI’s mandate should not be diluted and authority to initiate probe and take disciplinary action against auditors should rest with the institute.

The agency will strengthen the government’s mechanism and will ensure faster enquires into accounting frauds. For the auditing profession as well, it will be a very positive step as the agency will oversee quality of profession. “But the government also has to ensure that ICAI’s mandate is not diluted.”

A recent study said there was a 45 per cent increase in Indian corporate fraud in the past two years. The proposed agency will have powers to penalise audit firms in case they are found guilty of misconduct. Penalty could also include the disbarment of such audit firms.

The agency will also be solely in charge of setting up and revising accounting standards and will have professionals from industry and several government bodies on its panel. The agency will make recommendations on formulation and laying down of accounting and auditing standards for companies. It will also monitor and enforce compliance and oversee quality of service of professionals in the industry.

ICAI has requested the corporate affairs ministry to not dilute its authority. If the government is keen on setting up an authority, ICAI has suggested that this look at high-value accounting scams above a threshold of Rs 1,000 crore.

profile image

About eMinds Legal

eMinds Legal

eMinds Legal is a Corporate Law Firm based in Gurgaon, India specializing in Corporate Legal, Corporate Secretarial and Compliance. The Firm comprises of a team of Corporate Lawyers and Company Secretaries with in-depth subject matter knowledge and participative industry experience of over 15 years.

Complinity Compliance Software

Complinity Compliance Software

Complinity Compliance Software

Corporate Law Referencer

Corporate Law Referencer

Corporate Law Referencer

Recent Articles

Recent Legal updates

Recent Gst Updates