The Supreme Court ordered the government to examine if PwC network firms violate India's foreign direct investment policy and other regulatory norms, and also set up a panel to suggest changes in laws to regulate multi-national accounting firms.
The top court asked the government to set up the panel within two months. It will have to study regulatory provisions and submit its report within three months of creation.
The judgement came on a petition filed by the Centre for Public Interest Litigation alleging that PwC violated FDI policy and that multi-national auditing firms practised in India in violation of the law. The top court also ordered that the Enforcement Directorate's probe against PwC be completed within three months.
A bench headed by Justice Adarsh Kumar Goel ruled the government may constitute the panel to look into the framework needed to enforce Sections 25 and 29 of the CA Act. The statutory Code of Conduct for chartered accountants needs to be revisited to appropriately discipline and regulate multi-nation accounting firms, the court said.
The committee will look into “whether on account of conflict of interest of auditors with consultants, the auditors' profession may need an exclusive oversight body”.
The committee may consider the need for an appropriate legislation on the pattern of Sarbanes Oxley Act, 2002 and Dodd Frank Wall Street Reform and Consumer Protection Act, 2010 in the U.S. or any other appropriate mechanism for oversight of profession of the auditors, the court said.
The Sarbanes Oxley Act provides protection to investors from fraudulent accounting activities. The Dodd-Frank law, a fallout of the 2007-08 U.S. credit crisis, overhauled financial regulation and increased oversight to prevent systemic risks.
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