Updated On:
12/11/2014
Auditors are required to protect the interest of stakeholders, presenting an objective report and unveil the defaults by the companies they serve. Several instances have come to light where it was found that auditors connived with the management to evade adverse remarks and also failed to report defaults by the company.
Pursuant to the SATYAM scam, US regulator Securities Exchange Commission had in April, 2011 imposed a penalty of $17.5 Action jointly on Satyam Computers, Price Waterhouse India and affiliate auditors for the accounts bungling that went undetected for several years. SEC asked Price Waterhouse India to pay $6 million in penalty for conducting "deficient audits of the company's financial statements and enabling a massive accounting fraud to go undetected for several years".
After taking over fraud hit SATYAM, computer services firm Mahindra Satyam said it had filed a lawsuit against past directors, some ex-employees and former auditor, seeking damages.
Mahindra Satyam, previously known as Satyam Computer Services, said the suit filed in a court in Hyderabad sought damages for "inter-alia perpetrating fraud, breach of fiduciary responsibility, obligations and negligence in performance of duties".
To ensure that the audit is carried out in true spirit and intent of the statute, the Companies Act has proposed strict penalty for the defaults committed by auditors. It has also provided that where an audit is carried out by a firm, the liability shall be of the firm and of every partner or partners who acted in a fraudulent manner or abetted or colluded in any fraud.