Crackdowns stoke fears of talent flight among audit firms
Amid a crackdown on erring auditors in cases of alleged financial irregularities, some experts and top executives at some audit firms are raising alarm bells about a possible flight of fresh talent from the profession.
While few are willing to speak openly against actions taken by regulatory and enforcement agencies against auditors for failing to flag financing bungling, senior executives at major audit firms said it was wrong at times to ban an entire audit network for alleged lapses by one or two individuals.
On the other hand, officials at regulatory and enforcement agencies said the audit firms tend to put the blame on individuals after finding themselves in the dock for their alleged role in frauds.
The officials have often pointed out that auditors are supposed to be the conscience-keepers of a company and it is their duty to ring the alarm bells even at the slightest hint of a financial wrongdoing.
In recent times, there has been a spate of actions against auditors, including against
PWC in the Satyam case and against Deloitte and BSR in the IL&FS matter.
Markets watchdog Sebi has moved the Supreme Court against the Securities Appellate Tribunal’s ruling that had quashed a two-year ban on PWC in connection with the ~7,800-crore Satyam scam.
In the IL&FS case, the Bombay High Court has granted a stay on NCLT proceedings against the company's erstwhile auditors, while some auditors were recently arrested by the Economic Offences Wing of the Mumbai Police in the NSEL matter, though they were released subsequently on bail.
Some auditors, including in the case of IL&FS matter, have come under the scanner of the Serious Fraud Investigation Office (SFIO) while National Financial Reporting Authority (NFRA) is looking into alleged accounting lapses at Infosys.
“There are fewer people now who are excited to join the audit profession, primarily due to a narrative that has got built around it in the recent times,” said one of the partners at a leading audit firm, citing actions taken by regulatory and enforcement agencies and the judiciary.
The Institute of Chartered Accountants of India's (ICAI'S) former central council member Vijay Gupta said strict actions taken so far against auditors have meant that they have to undergo unwarranted scrutiny by authorities all the time, thereby constantly being under the scanner.
This is dissuading the new talent from pursuing auditing as a profession, he added.
“Any young talent passing out from a professional course prefers to have freedom to practice his or her ideas in real life so as to explore one's self professionally. Sadly, auditing as a choice of profession is facing more roadblocks in the present scenario,” SHRM (Society for Human Resource Management) India CEO Achal Khanna said.
The head of a leading executive search firm said new talent is more excited to join consulting roles than becoming part of an audit firm.
“Liability mechanism for auditors is an area that needs to be duly addressed. Drastic actions are being taken against auditors even before being proven guilty,” said an auditor at a leading audit firm.