The Satyam saga in India has clearly indicated that the share holders of a Company cannot rely on the audited financial statements presented by the auditors whether under India GAPP, US GAPP or even IFRS.
Irrespective of the standards, auditors are only capableÂ of window dressing the accounts to suit the managements and can never be trusted by the investing public. Similarly, the system of Company Secretary being responsible for legal compliance is also not working in practice since he also receives his remuneration like the auditor from the Company itself.
In the interest of the general investors, I therefore call upon SEBI to review the present system of disclosures for the shareholders.
A few years back, SEBI discontinued the need for sending a print copy of the audited balance sheets to the shareholders as a part of cost savings. Since then, investors have become dependent on the analysis by market experts many of whom are in the pay rolls of individual FIIs and brokers and try to dovetail their recommendations to suit their masters.
After the advent of Internet any communication with the shareholders can be effectively done through the Internet at near zero cost. It is therefore possible for companies to share their financial results from time to time by posting them on the net.
Presently, companies only publish the copies of audited final statements which are consolidations couched in the language of the auditors meant more to hide than reveal. Since the financial cost of publication of the financial statementsÂ in e-form is negligible, there is now no need in the digital era to present only the audited final accounts of the Company to the public and to the shareholders.
Â It should be possible to provide a far detailed information on accounts including the ledger accounts with individual details of debtors, creditors, Bank accounts, inventory, etc. In fact the trial balance itself can be provided on net. There is little reasons for Companies to consider them as “Sensitive” or “Confidential”.
If such a system is introduced, along with provision for queries being raised, answered by Company officials and presented along with the financial information, then the dependence of the public on the auditors would be very much reduced.
Even the Rating agencies and Bankers can do independent analysis of the accounts and the type of frauds that were possible in Satyam with the help of compliant auditors and spineless company secretaries as well as independent directors would not arise.I hope that this revolution in the disclosure of financial performance of Companies would be the beneficial take off from the otherwise tragic Satyam saga.