Saturday, February 14, 2009


The recent financial fraud in India and overseas has truly indicated that banks and other financial
institutions, to which the hard earned public money is trusted, are fraud-prone. The deceptive practice
of using accounting treatments/ policies to make a company's balance sheet and income statement
appear better than they really are is a "White Collar" crime which is being resorted to at a large scale.
Comprehensive, rigorous independent audit, along with a review of internal controls, checks and balances and classification of NPA's is a must to ensure prevention of fraud and its detection at the earliest. The recent decision of Government of India under the "able" leadership of Mr. P. Chidambaram has taken a decision to allow public sector banks and their board of directors to appoint their own auditors i.e., the auditors of their choice. The Government has advised the bank board to pick up a panel of auditors from Reserve Bank of India and appoint any of the firm as their auditors as well as to audit their branches. This panel is a comprehensive list available for appointment. The biggest role the bank auditors have been playing so far has been, to provide an independent assurance as well as to act as a deterrent against mismanagement, siphoning off of funds or other fraudulent practices. The financial discipline has been inculcated into public sector banks by rigorous professional contribution of chartered accountant firms, independently appointed by RBI
to audit the accounts of the bank. The bank director including the Chairman and Managing Director as well as the Executive Director are being questioned on their decisions by the auditors, with a view to establish that the decisions are taken in the interest of the bank and any personal interest do not take a front seat. The recent decision of the Government is against the basic principle. The Government has even surpassed the authority of Hon'ble Comptroller and Auditor General of India who was always a member of the Committee appointing auditors which included RBI representative as well as Govt. of India - Ministry of Finance representative. The appointment of auditors to be
independent of the management is very necessary to ensure credit ability and reliability of financial statements as well as to prevent malpractices and drawing off of funds at the behest of the management or any other interest group. The decision of the Government is very dangerous and the Government need to reconsider the same before it is too late. We strongly condemn the government
decision in this regard.


Post a Comment