Tighter Laws for CA’s, Valuers and Monitoring Agencies
Accountants are professionals who manage the financial functions of a company including taxes, audits, and analysis. They can be working from an accounting firm or a big company that has its own accounts department. They have other professional duties too which depend upon their education and firm employment policies. It’s almost impossible to find an establishment without a third party managing the finances.
CAs playing a crucial role
Chartered accountants (CA) is a designation given to a professional accountant. Chartered accountants are that party and they work in various fields of finance, business, audits, taxation and financial agreements. It’s a designation given to accounting professionals who work in public sectors as well as private. Many are appointed by government bodies too.
So chartered accountants have been an integral part of establishments and businesses for a very long time. They maintain the finances of an establishment no matter how small or big. Their other duties include auditing, financial advice, statement analysis, taxation and general management of finances.
Occurrence of frauds
However, a lot of auditing lapses and diversion of bank funds over a couple of years have caused frauds and they have gone unnoticed by the regulators. To avoid more losses to the capital market due to auditing lapses the Security and Exchange Board of India have proposed tightened rules for all third-party auditors and chartered accountants of listed companies. The Kotak Committee which was formed for the purpose of improving corporate governance gave authority last year to the Security and Exchange Board of India to act against third parties and financial auditors who neglect statutory duties.
Action against violators of the regulations
The Security and Exchange Board of India has made a proposal that the board of directors of the company can take suitable action against any violations of the regulations or submissions of false reports. This decision has come after the Punjab National Bank scandal where they uncovered a $ 2 billion fraud that had not been caught for many years. Chartered Accountants and Monitoring Agencies do not answer to any direct regulators so this means that auditors now will have to be careful with the reports and certificates issued by them. They will have to make sure that they practice due diligence and report in writing to the audit committee of the listed company if there have been any violations of statutory duties and regulations.
It’s a great move that will ensure that the cases of bank diversions and auditing lapses will reduce. Since they don’t come under any direct regulators the Monitoring Agencies and chartered accountants will have to answer to the audit committee of their listed company.
Positive outcome expected
This proposed amendment will be able to let the Search and Exchange Board of India take actions against erring establishments. Certain chartered accountants, Agencies, and auditors are not registered nor regulated by them. If the board finds sufficient evidence against auditors who have been caught giving false reports and certificates or are not following the regulations, they can take appropriate action against establishments and listed Companies under the security laws.
The listed companies will have to disclose the details to the board immediately in case of default on debt or even a possible delay or default in the principal amount. These disclosures have in fact become mandatory following the previous scandals and frauds that got caught last year. The regulator also wants the company to give a five-day prior notice of every quarter details related to interest and principal amounts. This will make sure that the corporate governance and capital markets are protected and regulated.
