CAs as Whistleblowers ICAI is Divided

Members point to confidentiality pacts with clients even as institute mulls new code of ethics

Chartered accountants, who are often blamed for helping clients sidestep the law and masking the truth behind numbers, will have a new code of ethics. After a marathon council meeting last week, the statutory body that makes the rules for the profession decided to overhaul the present code. Amid spiralling incidents of corruption, allegations against senior professionals and a clamour for a strong anti-corruption law, the council debated whether CAs can become whistleblowers even as they play their fiduciary role in Corporate India. Council members of the Institute of Chartered Accountants of India (ICAI) are sharply divided on the subject because as auditors they are bound by confidentiality pacts they enter into with clients. A month ago the institute asked its members to adopt a system of know your clients, which would help audit professionals distance themselves from assignments that could question their credibility and drag them into litigations. Among other things, the move was also a fallout of the 2G probe that is keeping some of the senior professionals behind bars. But a rewriting of the code of ethics will have to address several issues. We may borrow some of the global best practices laid down by the International Federation of Accountants, and consider other aspects including the ones related to regulatory provisions and economic offences, said G Ramaswamy, president, ICAI.At present, an auditor uses the audit report, attached to a firms annual report, to point out anomalies and possible irregularities. Only auditors of banks and institutions have been told by the RBI to alert the regulator about frauds and violations. Besides reservations that several auditors have in assuming the role of whistleblowers, there is no provision for them to report irregularities directly to the government. But the problem is in enforcement. Most auditors are discharging their duties, but rarely is action taken against a company based on an auditors report or notes to the account, said S Santhanakrishnan, a senior CA.


Economic Times, New Delhi, 29-08-2011