The Institute of Chartered Accountants of India (ICAI) has alleged that state-run Punjab National Bank (PNB) is not sharing details related to the over Rs 13,000 scam linked to billionaire diamantaire Nirav Modi.
ICAI is the apex body of chartered accountants, and falls under the control of ministry of corporate affairs. It has set up a high-powered committee to probe if there were any systemic lapses that led to the PNB fraud. The committee is also expected to suggest remedial measures.
The ICAI had asked market regulator SEBI, the investigating agencies, and the bank itself to share details and findings in relation to the fraud. However, more than a month later, the CA regulator says the bank has not been cooperating with the committee.
“The entire concurrent audit of the Punjab National Bank was done internally; more emphasis was on their employees. In order to find out the systemic issues, we have called for lot of information from PNB. We could not get information from PNB; they are not at all cooperating,” said S.B. Zaware, member of the central council of ICAI, and chairman of the accounting standards board.
The relevant information has not been shared with ICAI, despite the government writing to the lender to do so, Zaware added.
In its initial report, ICAI had recommended appointment of external concurrent auditors at banks.
The ICAI hopes to release its final report soon, but is awaiting additional information, including any details from PNB, without which it feels the report will be haphazard.
The ICAI has also sent notices to the statutory auditors from 2011-2018, including to the auditors of PNB's Brady House Branch in Mumbai, where the fraud was unearthed.
ICAI officials say it would not have been possible for the the auditors to check each and every transaction, and the primary duty was that of company managements to put systems and processes in place to check fraudulent activities, they add.
However, the role of auditors would also be examined, and if there was any non-compliance or negligence action would be taken, say officials.
Separately, the ICAI has set up a panel comprising around seven to eight people to study the current operating framework of international accounting firms in India. The panel will be headed by Prafulla Chhajed, the vice president of ICAI.
The move follows an order issued by the Supreme Court in February, directing the government to set up a committee to examine the current regulatory framework for the multi-national accounting firms. The Big Four global accounting firms—Ernst & Young, KPMG, Deloittee and Price Waterhouse—all operate in India through a network of Indian firms.
“We are looking at overall how these multi-national accounting firms operate in India. As per the act, no foreign firms can practice in India. Their current presence is through network partners. The issue is about how are the arrangements they have with their network firms in India. How they are operating and all those things. Supreme Court wants ICAI to look into those matters,” said Chhajed.
The committee will send the report to ICAI's central council members, which will then be submitted to the Supreme Court.
A petition in the Supreme Court by a non-profit organisation Centre for Public Interest Litigation had alleged that foreign accounting firms were practising in India in violation of the FDI laws.
