Auditors seem to have developed a heightened sense of risk and are not content to tick the boxes and sign the papers.
On January 7, 2009, when B Ramalinga Raju resigned as the chief executive officer of Satyam Computer Services after admitting to fraud, he set in motion a series of acts by regulators to clean up corporate governance in India, including the role of top executives and independent directors.
Most of all, the incident changed the profession of auditing, which till then was usually described as 'dull' and 'anodyne'.
The ripples of Satyam continue to be felt and are perceived to be the reason for many auditor-client separations.
More than the number, auditors are exiting big names, which used to be a rarity.
Earlier, the auditor used to be like the family doctor that would treat generations, until the regulators stepped in -- in Satyam's aftermath -- to say the audit firm must be rotated every 10 years.
Now we have instances of firms not waiting that long.
Data from primeinfobase.com shows a high of 65 instances in 2020-2021, the pandemic year, of auditors exiting before completing their tenure.
The number came down as the business environment eased after the pandemic, but there were still at least 46 exits in 2021-22 and 38 in 2022-23.
In recent months, Deloitte quit as Adani Ports' auditor. The Big Four firm -- the other three are EY, KPMG, and PwC -- had earlier left as the auditor of Byju's after the edtech company failed to file its annual financial results in time.
In the first week of August, PwC resigned as the auditor of Paytm Payments Services Limited. It had also raised discrepancies at GoMechanic, the car services startup.
That is not to say there is wrongdoing in these companies. The thing is, auditors seem to have developed a heightened sense of risk and are not content to tick the boxes and sign the papers.
"In the post-Satyam scenario, there is often a disconnect between client and auditor expectations. Clients may seek a more lenient audit, focusing on compliance, while auditors are obligated to maintain a rigorous, independent assessment," says Maneet Pal Singh, partner, I P Pasricha & Co, a chartered accountancy firm.
Auditors state four reasons for quitting a client: Significant reduction in fees rendering the audit unfeasible, clients' inability to share information, poor internal control systems that the company makes no effort to fix, and poor reporting of financial statements.
Part of the reason could also be shareholder activism.
"Today's expectations of users of financial statements go beyond the true and fair view of numbers," says a senior partner at one of the Big Four firms.
But quitting is complicated.
A statement by the National Financial Reporting Authority (NFRA) in June put the ball back in the court of auditors.
It said quitting audit assignments would not absolve an auditor of its responsibility if fraud was noticed during their tenure at a later stage.
The Companies Act requires the auditor to inform the ministry of corporate affairs of the reason for resignation, which in turn must be accepted or rejected by the government.
"Auditors have a lot to answer for. When the going is good, they are happy to look the other way," says a senior government official.
The Company Law Committee report said there was a need to review the provisions concerning the resignation of auditors.
Borrowing from the UK Company Act, 2006, the committee said: 'The auditor shall be under an explicit obligation to make detailed disclosures before resignation and should specifically mention whether such resignation is due to non-cooperation from the auditee company, fraud or severe non-compliance, or diversion of funds.'
Thereafter, the company must either forward such a statement to the shareholders or approach the adjudicatory body for directions for not sending such information.
"If the auditor considers it not possible to continue with the audit, they may consider withdrawing. However, this does not do away with their immediate reporting obligations," says Vidisha Krishan, partner at M V Kini, a law firm.
The auditing community feels the burden of increased regulatory oversight, user expectations, and media activism.
Policymakers, on the other hand, point out that audit standards in India are almost in alignment with international standards.
"The presence of an auditor does not preclude a fraud, but it will be too much to say that the auditor has no whiff of it. Telltale signs cannot be missed easily," says the senior government official quoted earlier.
That said, regulators might need to temper their zeal. Government sources say that NFRA had initially decided not to allow a lawyer for the auditor. This was however changed.
No wonder, finding high-quality talent has become difficult for the auditing profession.
A Big Four professional sounds reminiscent while saying: "We became boys to men doing audit. The ability to audit is a statutory one. We are officers of law in a crude term, reporting to the shareholders, not to the board or the management."
That sounds neither dull nor anodyne.
Feature Presentation: Rajesh Alva/Rediff.com