Following is the extracts (Pages 63, 74 & 75) from the "white
paper on black money" issued by Govt. in Parliament on 21-05-2012. This is the
part of Supportive measures which Govt. intends to take.
D.2 Enhancing the
Accountability of Auditors (PAGE
63)
5.2.75
Unlike many developed countries, Auditors in India have not been requisitely
accountable, resulting in frequent undermining of this
important aspect. Apart from recent cases of distortionary corporate
governance involving highly reputed firms, cases are
detected regularly by the regulatory authorities where the
Auditors have failed to point out gross violations and even blatant
misrepresentations. In the absence of adequate effective
provisions, the Auditors are hardly ever held accountable for these lapses.
Another aspect of this problem is the way in which a firm
opts for an Auditor in this environment of low accountability and prevalent evasion, since a strict Auditor ready to blow the whistle
can hardly expect to thrive amidst competitors, many of whom
may be more than willing to cooperate and compromise at different levels. As
a result, a very important regulatory tool is virtually
losing its role in contributing towards greater compliance. There will be need in future to look into various aspects of the
functioning and regulation of the role of Auditors and
various other professionals verifying the declarations and statements made by
firms and ensure that there are adequate safeguards and
sufficient accountability of such professionals.
Annexure 3 : Recommendations of the Committee Headed by Chairman,
CBDT on Black Money (PAGE 74 &
75)
A Committee headed by the Chairman of
CBDT was constituted on 27th May, 2011 for examining ways to
strengthen laws to
curb the generation of black money in the country, its legal transfer abroad and
its recovery. The
Committee has submitted its report to the Ministry of Finance on 29th March,
2012 and its recommendations are summarized below:
6.7 Oversight in the private sector is almost absent,
except for some professionally managed companies. It mainly consists of self-regulation, and audit under the
Company and Income Tax laws. That the system of professional audit may be quite ineffective even in
professionally managed enterprises is aptly demonstrated by the Satyam case. We are of the view that
the burden of dual audit should be reduced to single audit (for both company and tax law) and the audit
system be detached from the management and control of the business. We, therefore, recommend that the central
government establish a regulator (under Company law / Income Tax law) to empanel auditors in different grades and
randomly assign them to the private
sector firms, based on category and payment capacity, with mandatory rotation
and maximum tenure of two
years.
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