The effectiveness of the statutory audit has been in question for decades but nothing worthwhile has been done to stem the rot.
Dual audit, the audit by two separate audit firms as a remedy to improve the credibility of statutory audit, is worse than the disease.
The independence of auditors or directors cannot be inculcated but it should be encouraged. Honesty cannot be mandated but must be built into the system.
Mandatory rotation of an audit firm itself, and not just the partner, is a powerful weapon. If an auditor closes his eyes to the management’s wrongdoings, he is seldom caught and this is one factor that encourages dishonesty, as brought to the fore in the case frauds perpetrated at Punjab National Bank.
The statutory audit is, inter alia, to assure minority shareholders…
