Like Lawyers and Judges in India, Chartered Accountants have always been placed on a pedestal one step higher than any other professional. In a developing country with liberalised economy, the Statutory Auditors play a very crucial role in facilitating close interaction between the corporate sector and the share-holders on one hand and regulators of the financial system on the other. The Statutory Auditors are required to certify the liquidity, profitability and solvency of a corporate entity by finalising its Balance Sheet and the audit report. The audited balance sheets of corporate entities including financial intermediaries are supposed to reflect the true and fair financial position of the company. They serve as a sound basis on which investment decisions are taken by the investing public and financial institutions. Further, the share-holders of corporate entities largely depend upon the audited statement of accounts to know about the safety of their investment in the company. The Statutory Auditors are therefore, expected to act as custodians of public interest, an important source of feedback to the Government for formulation of realistic corporate policies, assist the financial institutions in taking investment/lending decisions, as also facilitate regulators in regulating the financial sector. Notwithstanding, the useful role required to be played by the St atutory Auditors in the financial sector, our experience has been contrary to the above expectations and uniformly most disheartening and disgusting. I have been associated with the financial sector for nearly 35 Years and have functioned on the boards of several Commercial Banks and Public Limited Companies. I have observed that by and large the Balance Sheets of the corporate entities certified by the Statutory Auditors conceal much more than what they disclose. The auditors who are supposed to exercise independent judgement about the financial position of a company and realisability of its assets were found to be functioning under the pressure of the promoters/management draw up the Balance Sheet showing a rosy picture of the company's financial position. With a view to window-dressing the whole situation and avoiding their statutory responsibility, they qualify the Balance Sheet by giving a long list of explanations in the audit report. If one carefully reads the said qualifications in the notes and then goes through the Balance Sheet, one would find the total earnings and profitability indicated in the Balance Sheet to be highly manipulated. I would like to give a few instances, which are borne out of my own experience. In one of the companies, the Statutory Auditors did not assess the realisability or exchangeable value of the company's assets invested in its subsidiaries by way of equity and loan and showed a net profit in the Balance Sheet. In the qualifications however, the auditor mentioned that the company's subsidiaries, where it had invested a substantial amount, had negative net-worth and their losses had eroded their entire assets. Without expressing their own opinion, they have simply agreed with the management that their investment will be recovered in due course. Had the auditors objectively assessed the realisability of company's assets such investments would have certainly been treated as bad assets affecting the company's profitability and consequently the company would have shown substantial loss instead of profit. In another case of a nationalised bank, the Statutory Auditors in collusion with the management showed a net profit in the Balance Sheet while on actual scrutiny it was found that the bank should have shown a substantial loss instead of profit. Since I was on the Board of that bank, the management was forced to recast the Balance Sheet accordingly and the Statutory Auditors were suitably brought to book. In yet another case of housing co-operative society, where I was also involved, the promoters had mis-appropriated 75% of the money collected from the Members. The Chartered Accountants who audited the society's accounts had certified a fictitious Balance Sheet in collusion with its management committee. I can say with all the emphasis at my command that let any one scrutinise any number of Balance Sheets pertaining to corporate sector, they would be found to conceal the factual financial position of the company in financial terms. It would not be an exaggeration to say that the scams, which had taken place in the financial sector during the last one decade with serious implications, were to a large extent the handiwork of the Chartered Accountants connected with the financial intermediaries. 

2. Recently, accounting scandals of the Enron and World Com had cast their shadow over India too. When these scandals broke, public opinion was vociferous about the need for over hauling the regulatory frame-work for the Chartered Accountants. Many people highlighted the ICAI's poor record in handling disciplinary cases against its Members. It was also suggested that Auditors in the companies should be changed every 3 years and stressed the need for a Public Over-sight Board. While some others recalled that the Joint Parliamentary Committee on the 1992 Stock scam had rapped several Chartered Accountants for shoddy bank audits and called for strict disciplinary action on them the ICAI's follow-up action had left a lot to be desired. Added to this, Indian auditors too were part of the Modi/Xerox like scandals in the past. It has been generally observed that the Chartered Accountants instead of exposing the mal-practices perpetrating in the corporate entities including banks and financial institutions rather tend to assist them with their specialised knowledge of accountancy in their perpetuation and concealment. Recently, Naresh Chandra Committee on Corporate Governance constituted by the Government of India had submitted its report. The report exhaustively deals with the role of Chartered Accountants/Statutory Auditors and the independent Directors in the corporate entities. The Committee has obviously not addressed the main issues pertaining to the conduct of Statutory Auditors and the need to impart transparency in the accounting standards. There is an imperative need to do away with the `qualifications' in the Balance Sheets of corporate entities. The Statutory Auditors must exercise their independent judgement with regard to the `qualifications' and incorporate such items in the Balance Sheet. The Balance Sheet should be a transparent document reflecting the financial worth of a company, without reading the finer prints of the audit report. This responsibility should be squarely put on the Statutory Auditor. He cannot take shelter under the `qualifications' of the Balance Sheet. The Union Finance Minister, Shri Jaswant Singh has recently observed that "Chartered Accountants need to perform their jobs without any fear or pressure. They have to be more transparent in accounting practices. There is enough scope for improvement in the Professional Integrity and Accounting Systems".