Indian audit firms could be shut down and be
hit with fines of up to three times the amount of a fraud if found
complicit in a scandal, according to new corporate legislation.
The Indian government has presented to
Parliament the Companies Bill 2011, which establishes tougher
punishment for audit firms involved in corporate frauds.
The bill proposes to extend civil and criminal
liability to audit firms as well as partners if it is proved they
“acted in a fraudulent manner or abetted or colluded in any fraud
by, or in relation to or by, the company or its directors or
officers”.
Until now it has only been possible to
directly take action against individuals and not firms.
The bill imposes higher jail terms for firm
employees, stating that “any person who is found to be guilty of
fraud, shall be punishable with imprisonment for a term which shall
not be less than six months but which may extend to 10
years”.
The bill also seeks to remove some punitive
powers from the Institute of Chartered Accountants of India and
pass them onto the National Company Law Tribunal.
