sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
ICAI »
 Result of CPT, Foundation, Final(Old) & Final(New) Examination held in Nov / Dec 2018 is likely to be declared on Wednesday, the 23rd January 2019, around 6 P.M. at
 Guidance Note on Audit of Banks 2019 edition: Section C - Bank Branch Audit other than Foreign Exchange Transactions issued by the Auditing and Assurance Standards Board
 Guidance Note on Reports In Company Prospectuses (Revised 2019) issued by the Auditing and Assurance Standards Board
 CPE Events 21th January -26th January2019
  Guidance Note on Audit of Banks 2019 edition: Section A - Statutory Central Audit issued by the Auditing and Assurance Standards Board
 Suggestions from Members of ICAI for Publication on Professional Opportunities
  Advanced Integrated Course on Information Technology and Soft Skills (Advanced ICITSS) - Adv. Information Technology Test - Computer Based Mode
 Important Announcement May 2019 CA Examinations
 ICAI Convocation 2019 (IInd Round) on 1st February, 2019
 Result of the Information Systems Audit [ISA] Assessment Test held on 22nd December 2018 is likely to be declared on 23rd January, 2019 around 6.00 PM.
 Results of the Chartered Accountants Final Examination (Old course & New Course), Foundation Examination and Common Proficiency Test (CPT) held in November/December, 2018 are likely to be declared on Wednesday, the 23rd January 2019 around 6.00 P.M.

No clarity on legal action against auditors
January, 10th 2009

Angry shareholders of Satyam may be miffed with the statutory auditors who have come in for sharp criticism following the dramatic revelations of accounting fraud in what is being billed as the country's Enron. But there is not much clarity on the kind of action shareholders can take against the auditors Pricewaterhouse Coopers under the laws.

"The contract that the auditor has with the company is not a contract the shareholders or other stakeholders are privy to. Hence, under Indian law it would be difficult for the shareholders to take any action against the auditors under the law of contract," according to Namrata Mehta, corporate lawyer, Economic Laws Practice, a law firm.

"It is a ticklish issue. Since the statutory auditors are appointed by shareholders they are entitled to take legal action. But investors have to prove that they suffered huge losses," said V Murali, central council member, Institute of Chartered Accountants of India (ICAI).

The shareholders must establish that they relied upon the auditors and that they suffered actual losses. If these conditions are satisfied the claim could well lie against auditors.

Though the books of accounts are prepared by the company and looked in detail by internal auditors appointed by the management, statutory auditors cannot absolve themselves of their responsibilities, Murali noted.

"Action in law has generally been taken either in contract or in tort," Namrata stated. Tort is a wrongful act done willfully in circumstances involving strict liability for which a civil suit can be brought. To establish a claim in tort, the shareholders have to satisfy the court that auditors owe a duty of care to shareholders and that there was a breach of such duty.

Even if the company takes action against the auditors under contract it would be limited by the terms of the contract. Many accountancy firms limit their liability usually to an extent of the fees they receive from the company, Namrata said. "How the court will view the liability of the auditors of Satyam will depend upon the extent to which the court is convinced about a claim for negligence."

Meanwhile, the ICAI has taken up the issue 'suo motu' and has referred it to its financial reporting review board. "We would look at the sampling techniques adopted by the auditors and as to why the normal checks by auditors did not bring out the facts," Murali said.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2019 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Careers

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions