The Week India – July 21, 2019

60 THE WEEK • JULY 21, 2019

BUSINESS

AUDIT

PHYSICAL VERIFICATION OF

assets as an audit process was in-

troduced about a century ago, after

investors suffered big losses in the

London Oil Storage Company case

in 1904. Auditors had had their highs

and lows in the past century, but the

Enron scandal in the early noughties

and the alleged involvement of the

audit firm Arthur Andersen in it put

a question mark on the credibili-

ty of audit firms. Enron ended up

bankrupt and Arthur Andersen had

to surrender its licence.

India got a taste of it when the

Securities and Exchange Board of

India barred the audit firm Pricewa-

terhouseCoopers from issuing audit

certificates to any listed company in

India for two years after the Satyam

Computer Services scandal in 2009.

Recently, the role of auditors came

under question again during the in-

vestigations into the IL&FS case. All

those who had been auditing IL&FS

and its subsidiaries in the past five

years have come under scrutiny.

Indian corporate sector pays

around 0 7,000 crore a year as audit

fees. Audit firms also make money

from tax consultancy, internal audits

and management consultancy. Also,

as a number of cases are being re-

ferred for insolvency and bankrupt-

cy proceedings, there is a growing

market for forensic audit.

“The final quality of audit is a

product of three Ps—partner, process

The increase in the number of complaints against audit firms is

a reflection of the surge in corporate misdeeds

BY ABHINAV SINGH

Counting the cost