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Accountants question ethics of withdrawal

BS Corporate in Mumbai

The Tata Finance-AF Ferguson imbroglio has rocked the entire accounting and consultancy fraternity, with many chartered accountants raising questions on the ethical aspects of a chartered accountant withdrawing a report.

A leading chartered accountant who spoke on condition of anonymity said, "The entire episode puts both Tata Finance and A F Ferguson in an extremely poor light. The decision on the part of A F Ferguson to return the amount of Rs 9.5 million is also very amateurish," he added.

No chartered accountant was willing to comment on record on the ethical issues involved in the withdrawal of the report since "only the ICAI can take a view on the subject."

However, N V Iyer, partner, Deloitte Haskins & Sells, said, "The decision on the part of A F Ferguson in withdrawing the report is absolutely ethical. If any new facts which materially change the inference of a report come to light after the preparation of a report, then the audit firm is bound to consider these facts."

"The return of the Rs 9.5 million could also be due to the implication of Section 226 of the Companies Act which states that an auditor who is a debtor of a company cannot hold office. In this instance, having withdrawn the report, Ferguson was bound to return the money or else it would be considered a debtor," Iyer added.

A partner of a leading accounting firm said, "The whole drama seems to have been done with a view to retaining the other audits of the group."

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