The president the Institute of Chartered Accountants of India, Amarjit Chopra, has called on independent directors to be held to account over their potential involvement in the Satyam scandal — India’s largest corporate fraud.
Chopra told International Accounting Bulletin Satyam was a corporate governance failure and it is unfair auditors should shoulder the blame while independent directors wash their hands of any responsibility.
“As the president of the institute, I feel very strongly that only the auditors have been targeted and the independent directors have been allowed to get away scot free,” Chopra said.
Chopra believes independent directors should be investigated and there needs to be a broader probe into the remuneration pattern and appointments of independent directors.
Chopra said audit committee members, and in particular the chairman, would have a better insight into the true financial health of a company than external auditors. He added that the audit committee is supposed to be financially literate and be able to pick up red flags on a company’s balance sheet.
While being careful not to absolve any responsibility from auditors, Chopra points out that external auditors come into play only at a later stage once the accounts have been approved and signed off by management.
As the investigation into the Satyam rages on, Chopra hopes reforms and new regulation will help prevent white-collar crime of such scale in the future.