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ICAI seeks details of Tata Fin case

BS Economy Bureau in New Delhi

In an unprecedented move, the Institute of Chartered Accountants of India has called for information from chartered accountants involved in the preparation of the AF Ferguson report on Tata Finance Ltd.

The institute is trying to see if there are any instances of non-compliance with ethical standards or negligence on the part of the auditing firm.

"Based on news reports, we called for information. In case instances of negligence are found, we will initiate further action," ICAI president Ashok Chandak said.

ICAI had sought information from the chartered accountants last week. "We have not received any information so far," Chandak said on the sidelines of a seminar on corporate governance and accounting standards organised by the Federation of Indian Chambers of Commerce and Industry.

Meanwhile, the department of company affairs (DCA) is planning to consult the institute on the course of action and the legal position on the developments related to AF Ferguson.

The information sought by ICAI is in addition to the decision of the department of company affairs to seek a copy of the AF Ferguson report and related correspondences under Section 234 of the Companies Act, 1956.

The registrar of companies in Mumbai has also initiated search and seizure proceedings against AF Ferguson under Section 234 A of the Companies Act. Chandak said he had not received a copy of the report from the government, either.

Asked if ICAI's action was in conjunction with that of DCA, Chandak said: "The department is conducting its own investigations on the Tata Finance issue. Our action is not related to any company since we cannot investigate any company but only our members."

Under the Chartered Accountants Act, 1949, ICAI does not have suo motu powers to seek information of this nature. It can only do so after receiving a complaint against a firm or an auditor. Auditors did not rule out the possibility of the ICAI move being challenged legally.

Interestingly, ICAI, in its draft proposals for amendments to the Chartered Accountants Act, has sought powers to ask for information suo motu. The government is, however, yet to decide on the issue. ICAI and DCA officials were slated to meet Finance Minister Jaswant Singh to discuss the proposed changes.

In the meantime, the finance minister has constituted a high-level committee under former cabinet secretary Naresh Chandra, which, apart from other things, will deliberate on the proposed amendments to the Chartered Accountants Act.

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