What is Your Insecurity

 #supriowrites #beingindian

What is Your Insecurity

Background - This is in response to a post where I have put my views on the writer's page. But for the benefit of my readers I would like to post it on my page here.

This is what she said.

1. She speaks Bengali fluently. Proud to be born in Kolkata.

2. Moved to the USA from Malaysia when she was 9 and since settled there.

3. Encourages speaking in our Indian mother tongue.

4. Tells us to be proud from where we've come. Incredible India.

5. Hashtags #Indianheritage #Bengali

6. Living in USA for the last 20 years.

What I say

There are a lot of Indians, Bengalis settled in USA who will never come back here. I have a lot of close relatives who fall in this category. Well educated. Well placed in the American society. Period.

But I see occasionally, once in a while, they talk of India, being a 100% Bengali, Durga Puja, Bhai phota, nationalism, and things like that. Trying to make us believe kya farak padta hai?

The thing is if you feel you're an Indian, a Bong as much as we are. So be it. No big deal. Why do you need to write about that again and again? What is your insecurity in USA?

My post on 22-08-2021 on LInkedIN re: The Big Four

 This is what CA Neeraj Arora posted yesterday on LinkedIN.

 It is the dream of many CA students to work in big firms and top firms.

Big4s have more than 3 LAKHS EMPLOYEES IN INDIA and more than 11 LAKH EMPLOYEES IN THE WORLD.

 67% of the listed companies in India are being audited by the Big4s.

99.4% of the listed companies in the world, which means 497/500 companies of S&P 500 are being audited by the Big4s.

Financials of companies like Apple, Amazon, Microsoft, Google, Facebook, Netflix, Reliance, TATA, Aditya Birla Group, HDFC are audited by Big4s.

Have you ever wondered how life in Big4s & Top Corporates is?

In the latest video of Neeraj Arora YouTube channel, Archit Agarwal has discussed the same.

Through this video, you will also get to know why you should start your career from a big firm or top firm?

To know the complete details check out the video now.

Link to the video is in the first comment.

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This is what have I posted. I post this here for the benefit of the readers.  

 #supriowrites #bigfour #pwc #deloitte #ey #kpmg

Neeraj Arora You're wrong. The dream is to become a successful CA. And to reach that destination become a successful student. End of the story.

The Big Four global statistics you have collected from Google doesn't add any value to the journey of kaamyaabi to anybody. You've given free publicity to the Big Four which they don't deserve.

I'm a writer. I write case studies. For a long long time. Always remembering them for the wrong reasons. Read my last article where I've written about the sweeping changes the UK government has made to wipe out the dominance of the Big Four. They have scrapped the audit regulator Financial Reporting Council (FRC) which will be replaced by a new audit regulator Audit Reporting and Governance Authority (ARGA) in 2023.

Things Chartered Accountants in India should take note of.

You need to read a lot before writing all this. Read about what the Big Four has done in UK, USA, China, Germany. You'll get the long list of all the countries where PwC has cases against them. Check Wikipedia. There are thirty one cases involving PwC across the globe in countries like US, Japan, India, Russia, UK, Ireland, Luxembourg, Brazil, Australia, Italy, Spain, Ukraine and Angola. But this list may not be exhaustive. These cases will be written about and discussed later. 

And then get back. We will tally with all that I've written.

Neeraj Arora You have deleted what I have written as you didn't like to hear the truth. But I would like my readers to read it here. 

 

PwC is under Probe in the Religare Fraud - Introduction

PricewaterhouseCoopers (PwC) is in the news again for the wrong reasons. PwC is under probe in a multi-crore loan fraud involving Malvinder Singh, former CEO and Chairman, Ranbaxy Laboratories and Shivinder Singh, ex-Vice Chairman, Fortis Healthcare and both one-time promoters of Religare Enterprises. Please read the entire write-up in the next article.

Over the last couple of years I have written on a number of cases involving PwC. Here I wanted to give the checklist for the benefit of readers. Please refer to my earlier articles. 

1. Kerala government bars PricewaterhouseCoopers for two years - December 2020

2. Sebi, MCA probing PwC's resignation as auditor of Reliance Capital and Reliance Home Finance - June 2019

3. PwC Resignation as Auditor of Reliance Capital and Reliance Home Finance Comes Under SEBI and Government Scanner - June 2019

4. SEBI, MCA probe PwC's resignation as auditor of Reliance Capital and Reliance Home Finance; ask stock exchanges to collect necessary information - June 2019

5. Delhi Court Summons PwC India's Chairman Shyamal Mukherjee and Chief Marketing and Communications Officer Nandini Chatterjee in a Defamation Case filed by Sarvesh Mathur, former CFO of PwC - September 2019

Every Child Matters - The Horrifying Story Continues

751 unmarked graves found at a now defunct Catholic residential school site in Cowessess in southeastern Saskatchewan province.

This discovery is the most significant and substantial till date in Canada. A grim reminder of years of abuse and prejudice indigenous communities have suffered in Canada as they continue to fight for justice and better living conditions

The church that ran the school removed the headstones.

It comes soon after the remains of 215 children were found at another residential school in Kamloops, British Columbia. It focuses on Canada's past policies of forced assimilation. 

The Marieval Indian Residential School operated by the Roman Catholic Church from 1899 to 1997. It is unclear if the remains are linked to the school and unmarked graves belong to children. Technical teams will provide a verified number and identify the remains.

The school was founded in 1890s by Catholic missionaries. The federal government began funding the school in 1901 and took over administration in 1969 before turning it over to Cowessess First Nation in 1987. It closed in the 1990s and later demolished.

It was one of the 130 plus compulsory boarding schools funded by Canadian government and run by religious authorities during the 19th and 20th Centuries to assimilate indigenous youth.

6,000 children died in these schools due to filthy health and living conditions inside. 

This is the truth about Canada's cultural genocide. Physical and sexual abuse at the hands of school authorities led others to run away.

Cowessess began to use ground penetrating radar to locate unmarked graves at the cemetery of the school. The announcement marked the first phase of the search efforts.

Cowessess First Nation hopes the church will work with them in investigating further.

This is a shameful reminder of Canada's systemic racism, discrimination and injustice that Indigenous peoples have faced.

What are residential schools?

Between 1863 and 1998, 1,50,000 plus indigenous children were taken from their families and put in these schools throughout Canada.

They were not allowed to speak their language or practise their culture and were mistreated and abused.

Canada's Truth and Reconciliation Commission launched in 2008 to document the impacts of this system found that indigenous children never returned to their home communities. The commission's landmark report said the practice amounted to cultural genocide. 

In 2008, the Canadian government formally apologised for the system.

The Roman Catholic church responsible for the operations of 70% residential schools is yet to issue a formal apology.

The Kamloops discovery reopened old wounds in Canada about the lack of information and accountability around the residential school system, which forcibly separated indigenous children from their families and subjected them to malnutrition, physical and sexual abuse.

Sucheta Dalal

Among the best known financial journalists in India, in 2006, Ms Dalal was awarded the Padma Shri, India government’s third highest civilian award, based on her outstanding investigative journalism since the early 1990s.

Her 35 years of investigative reporting spans the Harshad Mehta scam, CR Bhansali scam, and expose of Enron among others. She was the Financial Editor at The Times of India and has also written for Business Standard, The Economic Times, Indian Express and Financial Express among others.

She served as a member of SEBI’s primary market advisory committee, the Narayana Murthy Corporate Governance Committee and as a member of Investor Education and the Protection Fund of the Ministry of Corporate Affairs .

She has co-authored the best-selling book ‘The Scam: From Harshad Mehta to Ketan Parekh’ and a biography of A D Shroff, a Titan of Finance.

P.S. Her writing is one of the major reasons that has influenced my liking for current business affairs. Then came the stage of obsession. And now it's more of a passion. Many of my students and well wishers say that I've made it into a subject.

What is The Way Forward for CAs in India

I will give below some important exchanges of thoughts with two other very respectable CAs in the profession about Satyam, Big Four and our profession. 

Satyam - The irony about Satyam was S Gopalakrishnan, Partner, PwC, ex-Lovelock & Lewes, Hyderabad, the man who signed the Satyam annual reports till 2008, and who was held responsible was a member of ICAI AASB (ICAI - Auditing &  Assurance Standards Board). And he was considered to be big audit quality. A lot of lessons need to be learnt from IL&FS too. I think it is bigger than Satyam.
 
Joint Audit - Joint Audit not only of banks but in other organizations is required for transparency and independence. This will increase professional opportunities and overall fees too.
 
But will it stop another PNB scam? There were eight joint auditors. But in spite of that Nirav Modi and Mehul Choksi made a fool of everybody. Bypassed the system through SWIFT. Looted the bank in crores and crores of unearned income. And escaped to London and Antigua (now Dominica). Could we do anything? 
 
ICAI Regulations - The problem is with some ICAI regulations which have never been touched. 
 
ICAI cannot punish a firm ever. End of the story. That rule has not been changed even after Satyam when SEBI had to come in after a long time and punish. But it's still lying in court. 
 
A member can be punished. An easy thing to do. But never the firm. This is the root of the problem.
 
But there has to be enough room for ICAI, now NFRA, when the firm has to be punished. IL&FS is the biggest scam - corruption - greed case ever. Rs 1 lakh cr. So don't you think KPMG and Deloitte need to be hauled up? 
 
NFRA has punished Deloitte's managing partner, Udayan Sen. But is that enough? What about the firm? Check up what's happening against the Big Four in the UK and China. And how they have cleaned up the mess.

The UK has changed the regulator. And scrapped the old one. Financial Reporting Council. FRC. The Audit, Reporting and Governance Authority is a proposed audit regulator intended to be established in the United Kingdom to replace the Financial Reporting Council.
.
For an act of one person should an entire firm be banned? A firm can set up process and procedures...but no one can control human being. For this reason, the definition of Asset uses the word Control. For one corrupt minister you don't pull down the entire government. There should be process and justice delivery should be time bound. The US sets a good example. It is not that in the US partners in firms are not corrupt. I suggest and support a strong system.
 
There should be thorough investigation of the process of Deloitte or KPMG. Firms should be punished for shortfall in their process, not for individual partners taking calls.

Every Child Matters

Every Child Matters

Why so many children died at Indian residential schools.

It’s time for Canada to get up from its slumber and recognize these are children. It’s time to come together as a nation and hold accountable those who hurt them.

These children were taken away from their families, their culture, their lands - never to return home again. This discovery is a painful reminder of the legacy of the residential school system in Canada,

Unmarked and previously forgotten graves. An unthinkable loss spoken about but never documented. Many of Canada’s most notorious residential schools sit amid sprawling cemeteries of unmarked children’s graves. But a true figure will never be known as death records – if they were kept at all – were often lacking even basic personal information.

The deadliest years for Indian Residential Schools were from the 1870s to the 1920s. Kuper Island Residential School, located near Chemainus, British Columbia, saw the deaths of nearly one third of its student population in the years following its opening in 1889. The school would come to be nicknamed Alcatraz for its remote location and appalling conditions.

Call to examine St. Paul's Indian Residential school site after children's graves found in Kamloops.

Call to examine St. Paul's Indian Residential school site after children's graves found in Kamloops

New IL&FS Management Denied Vital Information to Forensic Auditor Grant Thornton (GT)

Inspired by Sucheta Dalal

 

GT very recently submitted the forensic audit report of IL&FS Engineering and Construction Company Limited (IECCL) which has exposed scandals and internal collusion to conceal wrongdoing and losses a decade back from 2011-12.

 

Despite a new board of directors of senior retired bureaucrats for three years, crucial data re: company and business has not been shared with GT.

 

Erroneous, incomplete and inadequate data were provided. Bank statements not provided in 40 cases. Statements in 122 out of 163 accounts given.

 

The entire top management cabal of IL&FS, Ravi Parthasarathy, Hari Sankaran, Arun Saha, K Ramachand, Mukund Sapre (MD of IECCL), MD Khattar and key managerial personnel (KMPs), used external and personal emails for official communication, not made available to GT.

 

The report is based on 40% of available data with IECCL. Project related data is 80% of total costs incurred and formed a critical part of GT’s review but just 22% available and provided to GT. The key information was not available for any project. This provides assurance that information is complete and no comprehensive analysis of projects required.

 

GT has received 25%-30% of data and 22.5% pertaining to projects. Naveen Agarwal, CFO said all the available data has been provided. Surely, he couldn’t have done that without specific authorisation by the board of directors!

 

So who is protecting the former management of IL&FS which burnt up so much of public money? Remember, the ministry of corporate affairs (MCA) has appointed this board of directors, comprising largely retired bureaucrats to work in public interest to recover money owed to pension funds, government institutions, bond-holders and a large number of private entities.

 

They are: chairman Uday Kotak, CS Rajan, GC Chaturvedi, Srinivasan Natarajan, Nand Kishore and Malini Shankar (mainly retired IAS officers and a former comptroller and auditor general, while the chairman is a billionaire banker).

 

They are supported by a set of very expensive lawyers, consultants and advisers who have first claim to any recovery. GT is silent about whether it raised this issue with the board of directors, the new audit committee and chairman Uday Kotak.

 

But the report is quite explosive as it exposes the rotten dealings of the previous management headed by Ravi Parthasarathy (who presided over this massive conglomerate for 25 years and stepped down just before its payment issues erupted in the public domain) and his followers. The team loyal to this management and still employed by IL&FS group companies is determined to bury wrongdoing, to cover up its own role in the dubious dealing. But who will hold the new management accountable for failure to cooperate with GT’s forensic audit team?

 

Since GT has clearly been instructed (by the new board?) to submit the report with less than half the information it asked for, there appears to be a conspiracy to bury all that is inconvenient and protect those responsible for losses of over Rs 40,000 cr that may never be recovered.

 

To be continued

  

An exit window to cryptocurrency holders

All the private cryptos, except any issued by the state, would be prohibited in India. That was announced earlier.

Now, an exit window to cryptocurrency holders is being thought as banning will deal a blow to investors holding them for years.

The framework may have a grace period of three to six months for investors before prohibiting the possession, trading, mining, and issuing of cryptos.

Issues relating to cryptos, consequences of banning and possible substitutes of blockchain technology — an advanced technology Bitcoin uses – have been discussed.

Concerns were raised by stakeholders, including Reserve Bank of India (RBI) on virtual currencies.

The potential damage in the case of a ban has been discussed.

The committee is expected to give its inputs, which will be examined by the ministry and department concerned before finalising the Cabinet draft note on cryptos.

Unlike fiat currencies, cryptos were not controlled by any central authority.

The new regulations will give clarity on controlling such currencies, which could be misused.

However, there is a difference in controlling and banning the asset/currency, which the framework will address.

Even if certain forms of cryptos are declared illegal, some grace period has to be given, or else it will create havoc in the market

The government had been receiving suggestions highlighting advantages and disadvantages of cryptos.

Some are valid. For example, a resident Indian can remit money abroad legally for many purposes, including investment in overseas assets.

Hence, they may trade cryptos through overseas brokerages. Restricting crypto trades will impact such regulations.

The government recently showed some openness to currencies like Bitcoin. And said that India is not shutting out all options when it came to cryptos or blockchain and fintech.

The cryptocurrency market is booming and is the reason the bill has delayed, especially when Bitcoin touched $61,000.

RBI has flagged concerns about cryptos owing to financial stability, which was not in sync with the government’s latest position.

However, more deliberations are required.

The RBI had banned such currencies through an order, which was struck down by the Supreme Court last year.

In India, despite government threats of a ban, transaction volumes are swelling and 8 million investors now hold Rs 10,000 cr ($1.4 billion) in crypto-investments as per industry estimates. 

UK Government to break up the dominance of the Big Four audit firms

The UK Government has unveiled proposals to reduce the dominance of the Big Four audit firms and scrap the industry regulator Financial Reporting Council (FRC).

The business of auditing companies' accounts, and ensuring they are a fair reflection of their financial health, is dominated by four firms: KPMG, Deloitte, PwC and EY.

The aim is to improve regulatory standards after big corporate failures like Carillion and BHS.

To ensure much more accuracy in accounts directors of companies will have more responsibility or face tougher penalties. The changes would help restore business confidence. A 16-week consultation on the proposals is on the agenda from the middle of March.

There is concern that providing both accountancy and auditing services creates a conflict of interest. We can refer to Sec-144 of Companies Act, 2013 wherein the services which an auditor cannot render has been detailed.

Large companies will now have to use smaller audit firms for their annual audit to dilute the Big Four's dominance.

KPMG, Deloitte, PwC and EY will have to make their audits more rigorous.

They can face a cap on the number of companies they will audit, through FTSE 350 index, if improvements aren’t far reaching.

Almost a third of audits inspected on the FTSE 350 last year were in need of improvement.

The largest private companies in the UK would now face greater scrutiny from the regulators.

The collapse of construction giant Carillion is an example and a consequence of the failure in the audit profession.

The new proposals would help restore trust; similar measures had worked in the US.

The information on which people make their decisions is accurate and honest, and an auditor's role is to ensure that information is truthful.

People want to know three things about a business - how is it performing, is it honestly run, and will it survive. And auditors are the key to answering all three.

It is clear from large-scale collapses like Thomas Cook, Carillion and BHS that Britain's audit profession needs to be modernised with sensible, proportionate reforms.

A new accountancy regulator, Audit, Reporting and Governance Authority (ARGA), will implement the changes and replace Financial Reporting Council (FRC). It will have legal powers to force auditors and companies to resubmit their accounts without court action.

UK companies and directors will face curbs on dividend and bonus payments if there is misconduct, inaccurate accounts, or insufficient cash reserves. Bonus paid to directors of failed firms will be clawed back up to two years to clamp down on rewards for failure.

By providing more transparency over company accounts this will discourage firms facing insolvency from making large scale dividend and bonus payments. They will also be required to produce resilience statements.

Accountancy firms welcomed the proposals. The proposals also won the support of employers' groups.

Conclusion

There are a lot of takeaways and lessons to be learnt from the above and what the British Government is doing for improvisation of the audit profession in the UK vis-à-vis the Big Four.  

Can we, the Chartered Accountants in practice in India, along with our regulators viz, ICAI and NFRA, take ourselves forward a decade ahead is the million dollar question.

Findings of NFRA on Audit of IL&FS by BSR & Associates LLP for 2017-18

Note - BSR & Co, formerly Bharat S Raut, is part of KPMG’s domestic and international network for auditing. KPMG does auditing work in India through BSR an Indian chartered accountant firm that also signs on the balance sheets of Indian companies. KPMG, a network of global firms, cannot conduct audit as per Institute of Chartered Accountants of India (ICAI)’s regulations. Hence it conducts audit through BSR. It is just for signing purposes that such arrangement is made.

1. BSR’s appointment as statutory auditor of IL&FS Financial Services Ltd. (IFIN) for 2017-18 was illegal, since BSR was not eligible to be appointed due to violation of Sec 141(3)(e) (subsisting business relationships on the date of appointment) and Sec 141(3)(i) (provision of non-audit services directly or indirectly) of the Companies Act, 2013. BSR’s continuation as statutory auditor was also violative of Sec 141(4)

2. Notwithstanding such lack of eligibility, and without prejudice to such finding, NFRA has conducted a full Audit Quality Review. The important findings in the AQRR (Audit Quality Review Report) are mentioned below.

3. Failure to comply with Standards of Auditing (SAs) documented in AQRR are of such significance that NFRA concludes BSR did not have justification for issuing the Audit Report asserting that audit was conducted as per SAs.

4. Please refer to ICAI’s Implementation Guide on Reporting Standards. If during a subsequent review of audit process, it is found that audit procedures in SAs were not complied with, it tantamounts to auditor making a deliberately false declaration in the report and consequences for auditor could be very serious indeed.

5. BSR and KPMG network entities de facto use the KPMG Trade Mark and Brand Name for all their audit and non-audit services, making a futile attempt to show a de jure separation from KPMG. This will fail in view of public perception of BSR network entities being part of KPMG global network, and legal agreements between them. Non-audit services provided technically by KPMG labelled network entities are services provided by BSR entities, and result in gross violations of independence requirements for auditors as per Companies Act, and Code of Ethics mandated by Institute of Chartered Accountants of India.

6. IFIN didn't comply with Minimum Net Owned Funds and Capital to Risk Assets Ratio as on 31st March, 2018. These were negative, against a minimum positive requirement, and this non-compliance continued since long. Financial Statements (FS) of NBFC have to disclose these numbers. IFIN’s management contested RBI’s computation method and showed positive numbers as per its own definition. BSR was convinced that IFIN management was wrong. But they went along with wrong numbers disclosed in the FS, with only an Emphasis of Matter (EOM) para in Auditor’s Report, when EOM is justified only when the disclosure requirements as per SAs are fulfilled. Thus, BSR failed to highlight a material misstatement of major magnitude and fundamental importance.

7. Unjustified Valuation of a Derivative Asset: Rs 184 cr. Reversal of General Contingency Provision: Rs 225 cr. Non-provision for Impairment in the value of Investments: Rs 200.20 cr. In the above cases, BSR has not obtained sufficient, appropriate audit evidence, as required by SAs, to support the numbers finally reported in the FS. The total of the 3 items led to an inflation of profits of IFIN by Rs 609 cr

8. Numerous other violations of the SAs have been detailed in the AQRR. These deal with the assessment of the use of the Going Concern assumption by the management, the complete absence of the required communication with Those Charged With Governance, inadequate and improper evaluation of the Risk of Material Misstatements, determination of Materiality amounts on the basis of non-relevant factors, etc

9. The Engagement Quality Control Review (EQCR) mechanism was found to be completely inadequate for the intended task.

10. NFRA has also extensively studied the IT processes and platform that are used by BSR for their Audit File documentation. NFRA found that the IT processes/platform have deficiencies that are systemic and structural in nature, and arise substantially from a complete disregard for basic principles of IT security in the software used. This renders the audit documentation completely unfit for the intended purpose.

Deloitte having big problems of auditing professional ethics and quality in China from 2016

There are serious problems at the Beijing office of Deloitte. And Deloitte is just playing by the Chinese audit industry’s unspoken rules. 

A leaked document from a Deloitte employee who remains anonymous at their Beijing office outlined serious problems of auditing professional ethics and quality going back to 2016. It had been sent in a group email to colleagues. The report reveals the unspoken rules of the Chinese audit industry.

This has been communicated to Deloitte management and Deloitte Reputation and Risk Group (RRG) more than 30 times for 2 years since 2018, requesting Deloitte to deal with audit quality reporting issues properly. 

The employee seems to imply that managerial conflicts of interest may have resulted in inaction up till now.

Deloitte has taken no action against the accused individuals, even though the problems were first pointed out in 2018. The accused include two partners and multiple senior managers who are all mentioned by name.

The main accusation is failure to abide by proper auditing protocol. Deloitte took major shortcuts telling their clients that their jobs were thoroughly completed when they were not.

The firms include Sinotrans, a logistics platform of the state-owned transportation conglomerate China Merchants Group, Boqi Environmental, a well known waste management provider and LG CNS China. 

RYB Education — an NYSE-listed company that itself had a scandal in 2017 involving child abuse at a kindergarten — is mentioned as compensating employees with gift cards and paying for their expenses, including those incurred by senior executives’ children overseas, irregularities to which Deloitte has turned a blind eye. 

Deloitte auditors are accused of dilly-dallying on the job, failing to read requisite files, skipping quality control procedures, and even falsifying data. Pictures in the report depicted stacks of papers strewn across floors of windowless rooms.

Response from Deloitte and the regulators 

The China Security Regulatory Commission (CSRC), the main financial regulatory body equivalent to the SEC in the US acknowledged the report’s existence. CSRC now wants to verify and follow up with the relevant institutions.

Deloitte responded on its website saying that Deloitte had started an investigation and no evidence was found that affected the adequacy of their audit work. It said Deloitte reserves the right to take legal action for the spread of false information. 

But the employee had tried to report the malpractice through the appropriate channels, but Deloitte had reacted by suspending their career development. Deloitte also documented a culture of bullying and intimidation tactics.

Deloitte is one of the Big-4 largest accounting firms in the world along with PricewaterhouseCoopers, KPMG and Ernst &Young. In 2020, Deloitte was listed as one of the largest privately owned companies in the US along with Koch Industries and Cargill, the agri business giant. 

If genuine, the document offers a rare window into a lucrative but shadowy arm of the global financial system. Auditors mediate between private institutions and public regulators, making their own work less transparent and less scrutinized relative to the private clients they serve.

Instead, auditing firms rely mostly on internal ethical codes and self-enforcement mechanisms to ensure quality. This makes it difficult to see when they are misbehaving. 

In recent decades, as global financial firms have flourished, business practices and financial instruments have become more complex. Tax auditing, which has grown along with the industry, has developed into its own kind of complex trade, with its unique culture, practices, and vocabulary.