Financial Daily from THE HINDU group of publications
Thursday, Dec 12, 2002
Financial Daily from THE HINDU group of publications Thursday, Dec 12, 2002 |
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Opinion
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Auditing Columns - Account Speak D is for disclaimer
A FOR accountants, B for badly bungling, and C for caught cooking. Now, PriceWaterhouseCoopers (PwC) has let loose a Daisy Cutter of disclaimer to get over all problems. It has altered the wording of its basic audit opinion to effectively limit the faith banks place in audited accounts. The move is a fallout of a case that is still hanging fire — Royal Bank of Scotland vs Bannerman Johnstone Maclay — where the bank argued it had relied on audited accounts when deciding to extend a loan. Getting alerted by possible outcome — that banks can sue the auditors of a bankrupt for lost funds — PwC will plug in a new paragraph in its standard audit opinion which would read thus: "We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to who this report is shown or in whose hands it may come, save where expressly agreed by our prior consent in writing." While the big firm takes shelter behind legal advice to include such disclaimer, as otherwise it could be effectively underwriting the bad lending decisions of the banks, there is opposition on two fronts: One, from other leading accounting firms that PwC chose to make the change independently rather than work on an industry-wide norm; and the other, that the idea has come at a wrong time when there is already high public pressure to restore investor confidence in published accounts. Liability limiters and disclaimers are nothing new for most of us, be it in the parking slots or operation theatres, books or ads, CA journal or Microsoft software. But when stretched, trust gets boxed on too many fronts. When you cannot put faith in the watchman to safeguard the stereo inside your car, banker to protect earnings from deposits, minister to work for a firm fiscal policy, policemen to catch thieves, books to be educative, software to function friendly, regulatory bodies to remain alert, Carnatic music to be free from commercialism, medicines to guarantee cures, or accounts to tell the truth, why expect an auditor to be fearless?
D. Murali
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