Post PNB scam, CA regulator says it supports efforts to bolster current system via amendments to Act

The Institute of Charted Accountants of India (ICAI) has said that it supports efforts to strengthen its existing disciplinary and oversight mechanism through amendments to the CA Act.

This comes in the backdrop of allegations about the role of Chartered Accountants (CAs) in the Punjab National Bank (PNB) scam and Finance Minister Arun Jaitley pointing fingers at auditors and regulators for failing to detect such frauds.

However, ICAI has indirectly opposed the setting up of a super regulator National Financial Reporting Authority (NFRA) to regulate the CA profession. “ICAI supports every effort of strengthening the existing mechanism. But the model of oversight mechanism on the pattern of overseas regulations like Sarbanes Oxley Act 2002 (or SOX) has been found to be ineffective in so far in back-drop of banking sector mortgage scams in the US (in) 2008-2009,” the CA regulator said in a statement.

The SOX is a U.S. federal legislation that had brought in new or expanded norms for American public accounting firms, public company boards as well as management. The ICAI also said a Parliamentary Standing Committee had recommended that, “Consistent with its position on strengthening the oversight of corporate audit, the committee desires that the existing mechanism in this regard under the CA Act should be streamlined and strengthened without needlessly adding to regulatory levels. This may be undertaken in consultations with the ICAI, which is the designated elected self regulatory body for professional audit in the country.”

‘Imprudent to judge’

The CA regulator said till the time disciplinary inquiry was concluded in the PNB matter and the role of all those who acted in fiduciary responsibility was established, it would not be prudent to draw any conclusion against the profession. The ICAI remained committed to ensure accelerated inquiry and conclusion of the disciplinary proceedings in the PNB matter, it said. An ICAI High Powered Group to look into the alleged PNB bank scam had held its first meeting on February 23 in Mumbai, the CA body said, adding that the GM (Western Zone), PNB, appeared and made his statement.

On strengthening its disciplinary and oversight mechanism, the ICAI said it had already submitted its comments for the recommendation of the Central Government-appointed High Level Committee (HLC), which had also already drafted amendments to the CA Act.

Even before formation of the HLC, ICAI constituted an internal group to review the disciplinary mechanism and submitted its suggestions to the Centre for suitable amendments in the CA Act.