Don't ever blame the Auditors; Blame the Systems

Do you think you can develop good singers, if you don’t have good listeners! Give a though on it

Similarly, you can’t have good Auditors if nobody takes Audit seriously.

The Auditors are not performing, not because there is a problem with their education, training or sincerity, but for the reason that no one is serious in getting audited. The Audit Reports are prepared just for the purpose of Tax Clearance Certificate (TCC), a traditional approach and importance of TCC for no reason. Where, even two Audit Reports are prepared one for Tax Department and another for Bankers and another for their Internal (Actual) record of the business transactions.

The Auditors of today are equipped with latest Techniques, Standards, education, training, skill-sets etc. and if given an environment, time and a reasonable value for their time, I am sure they can do justice with everyone an investors, authorities or to the own professionals. Therefore, don’t ever blame an Auditor; blame the system where the Auditee is only interested in getting a “Clean Certificate”.
The Auditors of today are working in an environment where many of the Auditees want to hide things and avoid transparency. This includes both Private Sector as well as Public Sector entities. This suits them because unethical business practices have become a way of life. In a race to show good numbers and a glowing picture, businesses try to avoid serious Audits and just try to engage into formalities. They pay least possible fee, give little importance to Audit and Auditor, try to manipulate records, hide facts, indulge in various kinds of unethical business practices, keep transactions off the records and make fool of everyone and still everyone is well educated about this too (that may be the Auditor or the Auditee, or the Banker or the Authorities i.e ICAN, NRB, IDR, OCR and others). While some do this out of compulsion, others have fraudulent intentions.

Ultimately, the sufferers are the taxpayers/the Investors (on Assessment/ Full Audit has to pay lump sum Overhead to tax officer), the Govt. (loss revenue) and Public at large (misrepresenting the financial statement will never signify the true picture of the company). Therefore, we have to fix entire system and instead of passing new laws/bills, we have to improve and implement the existing ones first in priority. Moreover, if you expect services of International Standards and adopt global practices, you can’t just pay a fraction of fee to the Nepalese Firms as compared to their Global Peers like so called big 4's.

Do we really want to clean the system and do we really want good quality Audit done? If that be so focus on the major areas or sectors:

·         How come that Banks are appointing their own employees as Auditors (Internal Auditors) and keeping important transactions off the records, despite repeated complaints of frauds and misreporting. Strictly regulating the Banks and corresponding the submitted financial statements with the Tax Department.
·         Why Banks/INGOs/ and other corporates insist only on Audits from Big-4/ancient audit firms. Is this for transparency or for some other reason not known to us. There is nothing which only these ‘Consultancy Firms’ offer and we Nepalese can’t. In fact, I have no hesitation in saying that Young Nepalese Consultants are far more knowledgeable, efficient and capable, as compared to many of these ancient audit firms. However, the Govt., has no interest in intervening in these areas, despite their open flouting of Laws.
·         Why bankers and other corporates do not complain when they find that Auditors have not done their job properly. They wake-up to blame auditors only when a fraud has surfaced in public domain and when it comes down to fix responsibility and accountability.
·         Why there is no serious Audit of various Govt. funded Schemes and there is no participation of CAs in Policy formation and implementation of various Taxation and Fund raising ideas of the Governments. Are we not doing just a formality?
·         There are many more such cases where the Auditee itself doesn’t want interference of Auditor.

Therefore, the quality of Audit will improve only if there is seriousness from the side of Auditee and if the Auditor is paid reasonable remuneration for its assignment. Moreover, the need of hour is to pay Nepalese Firms as per Global Standards, otherwise don’t compare them with Multinational Accounting Firms (MAF). In fact, just like Foreign Law Firms are banned to practice in Nepal, the Big-4 and other MAFs should also be completely banned. Our Institute must take strict disciplinary action against deputations of these Big-4 and MAFs in many sectors but majorly the Auditee Awareness program need to be conducted first to develop the quality system.

It is my belief that no CA or CA Firm can do justification with its Audit and Assurance job with independence and with authority, if his/its appointment and fee is left at the mercy of Clients. Time has come to change this old system of appointing Auditors, which is full of flaws, and put some system in place for allotment of Company Audits.

There are also serious issues w.r.t allotment of various other assignments related to Tax Audits, Internal Audits, Certifications etc., where utmost independence is required. If Clients continue to appoint their own Auditors at their own terms and fee, nothing is going to change and we will always be blamed for mis-reporting.

I don’t think these days trending NFRS /NAS would change rules of the game. If the authority can’t regulate the Appointment and Fixation of Auditors’ Fee, it has no business to regulate the Quality of Audit.

Do we expect anything from our Council, or I am hoping against hope? Till date there is no official statement from our council on any policy level at OCR, DOI, IRD, NRB and other government sectors for the CA community. It seems they are ready to take hit from all sides and let this Institute sink. What stops them to take a strong stand on these issues??

Why our council members can’t respond strongly in such a scenario?

Hope fully, the newly elected council members would address and respond to our thought and imperfections being noted.

Therefore, unless entire CA community speaks in one voice, nothing really will happen. Let's not divide, make a multiple groups for the same purpose, Let's unite and work together being a Professional Family Members under the same professional home.

~By CA Loken
प्रकाशित मिति : Thursday, May 31, 2018


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