Since KPMG is not registered in India, it cannot undertake auditing work or restate accounts of beleaguered Satyam Computer Services, said Ved Jain, president of the Institute of Chartered Accounts of India. He said the matter has been taken up with the central government and other regulators, and he expects the authorities to take appropriate action soon.
"India is a part of the WTO negotiations, and it had not yet opened its accounting, auditing and taxation services to foreign firms. Under category no 862 (accounting and auditing) and 863 (taxation services), no foreign company can perform these services in the country. However, under category 865, companies like KPMG can carry out management consultant services," he said, adding that Deloitte Huskins & Sells, however, has been registered with the ICAI.
After B Ramalinga Raju, founder of the beleaguered Satyam Computer Services confessed to the Rs 7,800-crore (Rs 78 billion) fraud, the government-appointed three-member board of Satyam has appointed auditing firms KPMG and Deloitte to restate the financial statements of the country's fourth largest software exporter.
Jain, who was in Hyderabad to inaugurate the institute's first three-acre centre of excellence on Saturday, said ICAI's investigation into the Satyam scandal is expected to be completed in three to four months. "We have asked Price Waterhouse to submit report on its work relating to Satyam accounts. A special committee formed by ICAI to scan the role of the auditing firm and decide if there is any negligence committed, will submit its report by the third week of February," he said.
When asked on the expected action to be taken against S Gopalakrishnan and Srinivas Talluri, the two auditors who signed the Satyam accounts, Jain said though PwC Private Limited was not registered with ICAI, Price Waterhouse-Bangalore was a registered entity.
Stating that ICAI has set up a high-power committee in the wake of Satyam scandal in order to ensure accounting standards, he said the committee will bring out its recommendations, shortly.
"Rotation of auditors is not mandatory for corporates globally. However, we have recommended to the government that in the case of public interest companies like banks and insurance firms, the auditor should be approved by the regulators like the Insurance Regulatory Development Authority and the Reserve Bank of India," he said.
Asked why ICAI had not taken any action on the auditors who also signed the Global Trust Bank's accounts, Jain said the GTB case happened in July 2004, and the investigating agencies had started cooperating with them only since 2007.
"In 2008, prima facie, we found fault with the auditors and we referred the case to our disciplinary action committee. Action on the auditors will be taken in a reasonable time period," he said.