ekalavyak

S. Gurumurthyji said that "Companies pay two kinds of audit fee. Fees for checking and certifying accounts as correct. Sometimes also fee � a higher one -- for not checking the accounts but certifying them as correct.

But here is something out of the world. Heard of fee to an audit firm for checking not the company�s accounts, but its toilets? Fee to check and report that lavatories are stain free! The fee adds up to more than Rs18crores over three years. What then is the fee for checking accounts? Rs16crores. The higher fee for toilet audit indicates where the firm�s better skills lie. Of course the toilet auditor cannot be an Indian firm, as no Indian firm is known for that skill -- the skill to earn Rs 18 crore by toilet check. It is Ernst and Young. One of �the Big Four� accounting firms in the world. This is what the �Guardian� newspaper says on the toilet audit.

"Accountancy is dirty work, but who would have thought Ernst & Young could earn �2.4m for inspecting toilets? The Wall Street Journal has found that the firm was paid the money for what was coyly termed "pristine audits" between 2000 and 2002 by Health South, the disgraced US health company - which the accountants classified as "audit-related fees" but actually paid for scores of junior E&Y accountants to visit Health South's clinics to check toilets for stains. In fact, Health South only paid Ernst & Young $3.3m to audit its accounts, compared with $4m to check the lavatories. A variety of Health South executives have pleaded guilty to accounting fraud in a $2.5bn scandal - so it's a shame E&Y didn't spend less time looking up the U-bend". That is �U-bend� attached to the lavatory pot.

The toilet audit story is just a starter. A can of worms follows. Just three weeks back, the US Securities Exchange Commission sent notice to E&Y to stop fresh audit work. A few days back a partner of E&Y was arrested in Hong Kong for audit fraud. This firm habitually compounds its offences paying billions of dollars, that is, tens of thousands of crores, as fines! It faces scores of law suits and prosecutions and more are reported as days go. Yet this is what it says about itself. �We are a global leader in professional services; we are committed to restoring the public's trust in professional services firms�; our 106,000 people in more than 140 countries around the globe pursue the highest levels of integrity, quality, and professionalism�. Can there be a more acute lie?

It has no proper license to do audit work in India, but carries on merrily doing audits and attestation work. The Government is mute. The Indian CA Institute was quiet till three weeks back. Government agencies and corporates accord red carpet welcome to it. Respectfully pay millions of dollars as fee to get sermonised, even abused on how bad India is, and Indian corporates are. It advertises its services like cosmetic companies advertise their products. It holds international cricket matches to get visibility like Pepsi and Coke. It also gives World Entrepreneur of the Year Award in its name. It is all a cultural shock to Indian audit firms which cannot advertise or canvass for work.

The show continues. The winner of the E&Y World Entrepreneur of the Year Award this year is Mr Narayana Murthy, the chairman of Infosys. The Award function was media-hyped to sell E&Y in India riding on the brand of Narayana Murthy. Is the award honour to him? Or honour from him? The answer is obvious. The irony is that only a week before Narayana Murthy received the E&Y Award the SEC in US had sent notice to the firm to stop new audit work.

E&Y is just the context. The big four share the same character. But soft generally on foreign firms the Indian media does not expose them. So the Indian business is unaware of the true facts about the big four accounting firms. While these firms are under severe scrutiny all over the western world, they are revered here. Pursued by the media they are under fire from law enforcement elsewhere, but even governments respect them here. Today an award in their name may even be an embarrassment in the West. But here it is received as an honour. Paradox, isn�t it?"

Writer@Large

I honestly have no clue what this OP is referencing. ekalavyak, do you understand the nature of the IIDB?

This is headed to ~~Elsewhere~~.

--W@L