Supreme Court direction to scrutinize audit firms

Supreme Court directed the Union government to constitute a three-member committee of experts to scrutinize the existing regulatory regime and propose changes if required.

The ruling comes at a time when the role of auditors is already under scrutiny for their failure to detect the Rs.11,400 crore fraud allegedly perpetuated by group firms of jewellers Nirav Modi and Mehul Choksi in collusion with officials of state-run Punjab National Bank.

“Financial statements audited by qualified auditors are acted upon and failures of the auditors have resulted into scandals in the past. The auditing profession requires proper oversight,” the court observed.

The committee has to be set up within two months and will thereafter be required to submit its findings to the Supreme Court in three months.

The Supreme Court order said it would need to consider the need for an appropriate legislation or mechanism to govern the profession of auditors.