Fraud prompts systems check - Auditors of blue chips face peer review
January, 10th 2009
The auditors of frontline companies will now have to face a peer review of the way they function and present financial statements.
The Securities and Exchange Board of India (Sebi) today decided that the accounts of companies which figure on the markets bellwether indices the sensex and the Nifty will be picked for a peer review.
The review will be carried out by a panel of auditors chosen by the capital market regulator. It will cover the financial statement for the quarter ended December 31 and the last audited annual financial results.
The panel will review the procedures and standards followed by an auditor in preparing the financial statements of a listed entity.
Sebi said a few listed companies that didnt figure on the two indices would also be picked on a random basis for the review.
The decision was taken by the Sebi Committee on Disclosures and Accounting Standards (Scoda).
Observers said the move was designed to boost sagging investor confidence in the financial disclosures made by listed entities.
While the Scoda met in Mumbai, it is understood that it sought the opinion of the Institute of Chartered Accountants of India (ICAI), represented by Uttam Prakash Agarwal, the organisations vice-president.
In a statement issued today, Sebi said the decision had been taken in the light of the recent developments with respect to Satyam Computer Services Ltd.
Such a review would be in relation to the last quarterly results and the last audited annual financial results. For this purpose, a panel of auditors would be prepared by Sebi. This exercise would be taken up following the publication of the third quarter results and is expected to be completed by the end of February 2009, the Sebi press statement added.
Agarwal told The Telegraph that the ICAI has its own peer review board which had been functioning from 2004. We started the peer review in 2002 after the Enron scandal and more than 3,000 such reviews have been completed so far, he said.