Why it is good for Narendra Modi govt to take power away from ICAI ???
From Satyam to Kingfisher, most examples of corporate fraud have shown up the auditor as either unequal to the task or even complicit—and this applies not to small fly-by-night auditors, but many of the big audit firms. In the most recent case involving United Spirits Limited (USL) and Vijay Mallya where a forensic audit has thrown up clear evidence of Rs 1,225 crore of funds being diverted, top audit firms had been associated with USL—Deloitte did the due diligence for Diageo before it bought into USL, and USL’s auditors have included, from FY11 onwards, Price Waterhouse, Walker Chandiok and KPMG associate BSR & Co. When it comes to disciplining auditors, however, the regulatory body Institute of Chartered Accountants of India (ICAI) has been found wanting, and not surprisingly since its members are the very people/firms it is supposed to be regulating. The same thing applies to other bodies such as the Medical Council of India and the Institute of Company Secretaries of India.
Given this backdrop, the commerce ministry’s proposal to strip ICAI and other such professional bodies of their regulatory powers is a good idea since it prevents a conflict of interest. All of this is part of a plan to improve India’s regulation of the services sector and bring it on par with the global best practices. The biggest advantage of the independent regulators handling the affairs of these services on the lines of Sebi, Trai, or the Competition Commission of India, would be the plugging of the possibilities of delay and reluctance in taking action against members of their own fraternity. Certainly, it is true that professional bodies are the best judges in terms of standards and good practice, but there are ways to get around this issue—in some cases, professionals hired on the regulatory side could be asked to give up their licenses for even up to five years after they leave the regulatory body; in other cases, these bodies could still be asked to set codes and standards which can then be implemented by an independent regulator. The exact model needs to be evolved, but the need for it is not in dispute.