The NDA governmentâ€™s move to fix some accountability on the auditors of companies for certifying flawed balance sheets is beginning to pay off, it appears. In a latest, Price Waterhouse & Co Chartered Accountants LLP, part of the famed PwC Group of auditors and consultants, have resigned as statutory auditors of the Khaitans-controlled Eveready Industries India Limited.
This has emerged through a filing with the BSE and other capital markets that the company has since accepted the resignation of the auditors and appointed Singhi & Co in their place. The reason for Price Waterhouse leaving the auditing assignment appears to be the inability of the company to explain an inter-company entry of Rs 62 crore in the balance sheet.
This current resignation by PwC from the EIIL account is not seen as an isolated case within knowledgeable circles. The same PwC had earlier dropped out of two more clients, Reliance Capital and Reliance Home Finance. The auditor has claimed they have invoked the provisions of section 143 (12) of Companies Act read with Rule 13 (2) (a) while sending their letter of resignation to the company.
Coming back to this present case of Eveready Industries, the new auditor will also have to ask the same question of the company and obtain a satisfactory answer and record their comments while signing the balance sheet. According to PwC, this amount of Rs 62 crore has been advanced by EIIL to one of its group companies which is a lease hold company and there is no explanation forthcoming on how this amount will come back or be recovered. It is quite possible the company may decide to make appropriate changes in its books and present a satisfactory statement of account for the new auditors to scrutinise and certify, now that the issue is in public domain.
The only issue that the government and some of the regulatory bodies like the SEBI should address, going ahead, is the genuine grievance among the community that while the auditors are pulled up for their dereliction, the companies themselves which have been found to be indulging in wrongdoing go scot free.
There are expectations that more such high-profile resignations may follow in the coming days. Those with knowledge on this issue claim that the large multinational auditing firms are taking stock internally if they should continue working with corporate entities that cause them this embarrassment of not coming clean on their financials. Some specific sectors that pose more challenges are in the real estate and infrastructure segments.