Experts raise alarm bells on talent flight amid crackdown on audit firms

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.

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 Rs 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.

Business Standard