The fraud perpetrated by Satyam Computer Services Ltds founder B. Ramalinga Raju has claimed some collateral damage: the apex body of accountants in the country, and its current president Uttam Prakash Agarwal.
The government has, in recent weeks, tightened its control over the Institute of Chartered Accountants of India (Icai) diluting Agarwals own powers in the process.
The move comes ahead of crucial elections to the body founded in 1949 and which regulates the functioning of at least 150,000 chartered accountants who sign off on the financial statements of companiesa sort of first line of defence against any financial misconduct by management or promoters.
Some of the governments actions are seen by two people, an Icai council member and an official at the ministry of corporate affairs (MCA), as a reaction to Agarwals handling of the Satyam scandal, an allegation Agarwal denies.
Icais council is the institutes core decision-making unit.
One of the charges against Agarwal is that he has been soft on S. Gopalakrishnan, a partner at Price Waterhouse, which audited Satyams books, and now in jail as his role in the Satyam scandal is investigated. The allegation that I have gone slow on Gopalakrishnan or produced a weak report is absolute rubbish, Agarwal said.
The most significant rule change, approved by Icais finance committee last week, requires all financial issues at Icai to be now cleared consensually by members of the panel, which has three government nominees. Previously, the president of Icai, the fourth member of the committee, used to take these decisions on his own without too much interference by government nominees. The fifth member of the panel is the bodys vice- president.
It has been decided that while (the) finance committee will not dig into expenditure that has been made in the past, in future, all finance-related matters of Icai will come to the finance committee; spending on infrastructure such as on Icai buildings across the country and events will also need to be cleared by the committee, said a person familiar with the decision made by the finance committee who did not want to be identified.
This person also added that only a deviation of 20% from the proposed expenditure would be tolerated. Mint couldnt independently ascertain whether there have been any significant infrastructural investments made by Icai in recent years and whether the projects concerned, if any, cost more than initial estimates.
The committees decision comes in the wake of an email sent by a government nominee on Icais council and Supreme Court lawyer O.P. Vaish to Agarwal on 18 August that suggested discussing the issue related to financial decisions and others at an Icai council meeting the following day. Mint has reviewed the mail, but couldnt ascertain the status of the other points raised by Vaish.
Vaish himself couldnt be reached for comment.
The finance committee controls the institutes purse strings and oversees its expenditure. The audit committee is in charge of Icais reporting process and also recommends the appointment and removal of statutory auditors for companies.
There are eight government nominees in Icais council, besides 32 chartered accountants from across India who are elected to the council every three years. The government nominees include Krishna Kant, retired chief commissioner of customs and central excise; R. Sekar, commissioner of customs; K.P. Sasidharan, director general (commercial), office of CAG (Comptroller and Auditor General of India); Renuka Kumar, joint secretary, MCA; and Vaish. Sekar, Kant and Sasidharan are included in the reconstituted finance committee and the last named has been made chairman of the audit committee.
The Satyam connection
Happenings at Icai are related to the Satyam scandal that blew into the open after the companys founder-chairman B. Ramalinga Raju confessed in January to having fudged the companys books over the years by at least Rs7,136 crore.
One of the key questions we sought to address after the Satyam scandal was Who will regulate the regulator? said a second person familiar with the developments at Icai, who too did not want to be identified.
Meanwhile, Agarwal said at a Friday meeting of Icais council that MCA director Jaikant Singh had written a letter to the effect that Icais president, vice-president and council members should steer clear of all policy decisions and press statements under a code of conduct ahead of the institutes elections due in December. Such powers have been vested with T. Karthikeyan, Icais secretary.
This is unprecedented and shows lack of faith in the president by the ministry (in Agarwal), said the Icai council member mentioned in the first instance, and who spoke on condition of anonymity.
In press statements issued immediately after he visited Gopalakrishnan of Price Waterhouse in jail in March, Agarwal had said that prima facie Gopalakrishnan is not guilty. Gopalakrishnan has served on the council of Icai.
It was only last month that Gopalakrishnan was removed from several committees of the council and replaced by government nominees, said the same council member.
Agarwal, however, would appear to have changed his stance on Gopalakrishnan. On Monday, he said the auditor was prima facie guilty. The disciplinary committee (of Icai) also found four auditors from Price Waterhouse, Bangalore, S. Gopalakrishnan, Srinivas Talluri, P. Shiva Prasad and C.H. Ravindranath prima facie guilty of professional misconduct, he told PTI. The council member also found fault with Agarwals report on how Icai was handling the issue. This report was submitted to MCA.
The report is a mere reproduction of the charge sheet filed by CBI (Central Bureau of Investigation) and SFIO (Serious Frauds Investigation Office, part of MCA), said the member. An MCA official who did not want to be identified declined to comment on the report itself because it is being reviewed, but said, Agarwal has acted in an immature manner in many ways. He added that the ministry would prefer to see matters resolved within (Icais) council.
Under the Chartered Accountants Act, 1949, the ministry has powers to direct the institute. The official claimed that minister of corporate affairs Salman Khursheed, too, was unhappy with the goings-on at Icai and had been giving its functions a miss.
Mint couldnt independently verify this. Khursheed could not be reached for comment.
Some of Agarwals colleagues have also raised charges of financial impropriety against him.
In an open letter, a copy of which has been reviewed by Mint, Sunil Talati, president of Icai in 2007-08, has claimed that there have been large amounts spent unnecessarily.
Agarwal dismissed these allegations. Since council elections are round the corner, people are trying to defame me, he said. He added that the government had cleared the institutes accounts till March without raising any objections. It is easy to write open letters, but council members should prove where I went wrong.