Firms should rotate auditors to avoid frauds: KPMG audit

Audit firm KPMG on Friday said that firms in India should be asked to rotate the auditors every 6-7 years to avoid more frauds like in Satyam.

The role of bankers, which confirm the balance in the accounts, is also a matter of doubt and there should be a forensic investigation of Satyam books to detect the exact gaps, KPMG chief operating officer Richard Rekhy said.

KPMG emphasised the need to allow the business of Satyam continue as usual, which would provide a continuous stream of revenue to remunerate the 53,000 workforce.

On January 7, Satyam?s founder chairman B Ramalinga Raju quit after revealing that the company?s books were inflated for years. This raised suspicion that there may be similar cases within India Inc.

Rekhy doubted the veracity of the confessional letter written by Raju. ?It defies logic. One is not sure whether there is much more to it than is written in the letter and whether the letter contains all the facts,? he said on the sidelines of a CII function. It is too simplistic to believe that Raju alone did this kind of fraud, the KPMG COO said.

?It requires a whole battery of people to advance those accounting entries and credit those because you have to involve other people as well like bankers to get those certificates,? he said.

Questioning the delay in investigation, Rekhy said the ministry of corporate affairs should start the investigation in earnest.

?It should take the responsibility of overseeing the entire investigation. It would be better if we join forces of all the regulators and undertake a forensic investigation of the books,? he said.

?Whatever the investigation may be, the business should be allowed to run as 53,000 jobs are at stake and we need to ensure that the clients are serviced,? Rekhy said.

Defending the audit firms, he said the auditors go to the clients for a short period and have limited ability to highlight the discrepancies in the books, especially when the promoters are behind the fraud.

?If the intent of the promoters is to fraud, a lot of cover ups would be there, a lot of planning would be involved,? he added. KPMG audits the accounts of key companies in the information technology space including Infosys and Wipro.

However, the auditors should be changed every 6-7 years, as is the practice in the United States, to minimise the chances of their involvement in such cases, Rekhy said.