Wednesday, November 2, 2016

The Satyam of the CS profession-Company Secretaries-heal WIRC before preaching governance

The Institute of Company Secretaries of India(ICSI) is organized into 5 regional councils. Of these, the WIRC(Western India Regional Council) got a stinker in terms of adverse audit report due to financial iregularities pointed out by the statutory financial auditor-incidently a chartered accountant

The report goes into deep detail but to quote a few examples, the adverse observations include procurements at high prices without comparative quotations, organizing events in 5 star hotels without HQ approval, incurring hotel tariffs over authorized limit, purchasing luxury pens worth Rs 4 lakh and keeping with self, giving staff overtime via inflated conveyance vouchers, purchases via non substantiated invoices, giving sponsorship without written agreement resulting in potential NPAs. These observations led to AGM being adjourned, speculation in CS community and finally the supercission of the regional council, with the ICSI Central Council finally making its actions public below

While a single instance does not tarnish a full community, the institute employees are akin to public servants, and the office bearers being elected representatives of professionals, have a duty not to bring the profession into disrepute. What happened at the WIRC ICSI appears a failure of internal control, collusion/overlooking of employee fraud by elected council members who themselves were not setting a good example. And despite the audit taking 6mths to close, the council members did not comment on the audit report and just blamed the earlier President. This is not good governance.

While this is bad for any profession, it is especially ironic that ICSI which brands itself as a governance expert, did not nip the WIRC issues in the bud. One only hopes that the WIRC issues are investigated, corrective action is taken including reprimand/dismissals so that further episodes don't repeat. And here may I point out that it took a chartered accountant to detect the fraud, and not a CS/CWA. This only reiterates that financial audit is a job best left to CAs, and that having an auditor independent/not regulated by the institute(A CA is not regulated by ICSI) does help to detect fraud.

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