Cos may’ve to divulge details of auditors to banks

The government and the Reserve Bank of India (RBI) are planning to ask companies to disclose the name and the email address of their statutory auditors on an yearly basis to the banks where they hold accounts. The banks, in turn, would be asked to generate and directly send automated status reports of these accounts to the auditors at the end of every quarter or financial year.
This is a simple solution under consideration to remove the most glaring systemic weakness at the heart of India’s biggest corporate scandal — the failure of statutory auditors to independently verify the inflated bank balance of Satyam Computer Services. The proposal is being considered by PMO and RBI. If approved, the measure, which would not cost an extra rupee, would prevent auditors from failing in independently verifying the bank balances of their clients, said Suresh Prabhakar Prabhu, a former Cabinet minister and now a member of a Parliamentary panel that is looking into the Satyam scandal. Mr Prabhu, also a chartered accountant by profession, has written to the prime minister to take the proposal forward. “Almost all banks have automated technology platforms verified by RBI. It should also be made legally obligatory for all corporate bodies to notify any change in their statutory auditors to their banks,” Mr Prabhu told ET.
Many auditors ET spoke to confirmed it is impossible to independently verify all the bank statements and other invoices that companies provide to auditors while completing the audit of large corporations within a fortnight. Auditors approach their work with an unbiased mind, unlike that of a detective, who presumes that a fraud has already taken place. They independently verify only a sample of the thousands of documents as a full-fledged investigation by them is not feasible. The Parliamentary Standing Committee on Finance, which interacted with RBI on January 29 on the Satyam scandal, is also learned to have made this suggestion to the central bank.