IiAS survey: 57% investors say Big-4 auditors have no credibility.

IIAS conducted a short survey of investors and sell side analysts, seeking their views on resolutions that are put to vote. The survey was conducted between April 13-21 and there were between 63 and 89 respondents, as much as 57 % of each of them have found “the Big-4 audit firms having lost their credibility with investors & are therefore open to move beyond them if they were banned”.

Between qualified and unqualified accounts, 73 per cent support qualified accounts because they feel that at least they got to hear auditor concerns and if they asked for lean accounts, the risk was that the auditors would be muzzled.  In June 2019, the Reserve Bank barred SR Batliboi & Company from carrying out statutory audit of commercial banks for a year after it found several lapses in the books of Yes Bank.

It can be noted that ever since Satyam Computers scandal that came out in January 2009 the audit world, especially the Big Four, have been under fire from the regulators.While market watchdog Securities and Exchange Board had banned PwC in 2018 from auditing listed companies for two years in the Satyam scam, the Securities Appellate Tribunal quashed the ban and the SEBI challenged it.

In the IL&FS case, Serious Fraud Investigation Office charged Deloitte Haskins & Sells and BSR and Associates (part of the KMPG network), for their failure in not disclosing the true financial health of IL&FS Financial Services and are looking at banning them from undertaking audits after they got some reprieve from the Delhi High Court.

In the CG Power fraud, the NCLT had thrown out the report prepared by Vaish Associates, terming it as unprofessional and full of ifs and buts.

A majority (57 per cent) of investors see promoters subscribing to warrants as a sign of confidence in the company and its operations.

However, equity dilution remains a concern for investors with 46 per cent of them being uncomfortable if dilution exceeded 5 per cent without disclosure regarding how funds will be used and 30 per cent putting this threshold at 10 per cent.

Also Read: MCA again relaxes expiry of names reserved by companies for incorporation

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