A few decades ago, accounting was called bookkeeping and those who managed them, bookkeepers. How times have changed. Today, the increasing complexities have transformed book keepers to consultants and audit professionals. And all of this is helping them make more money than imagined earlier.
While in the old days, “smart accountants” were paid a premium for helping businesses manage their books better and keeping taxes in check through clever accounting—exploiting available regulatory loopholes. Some were also rewarded for helping report toplines and bottomlines quite different from reality—creative accounting involving the purchase and sale of income and expense entries at a price.
Cooking Up A Storm
In a nutshell, accountants drew big packets for cooking the books. Times were good, often statutory auditors and book keepers were related firms, so it was all well managed. Even the regulator, Institute of Chartered Accountants of India, was a private club of chartered accountants—it is like having SEBI manned by brokers. This cosy arrangement has continued for many decades, and as a result, lenders, shareholders and other stakeholders have all been taken for a royal ride.
Things are changing now. Even though slowly, the wheels are finally turning the other way. There is greater regulatory scrutiny after cases of flawed audits have emerged. A top name has been put on notice with a potential bar on auditing work for its involvement in a mega scam. The recent slew of banking frauds are also putting the role of auditors in the spotlight.
Fearing severe repercussions, the cookers of books are now turning gatekeepers. The recent spate of auditor resignations from companies, which many of them have been auditing for years, without due clarification seems to point to a run for the door before the shit hits the ceiling.
Pray, how can a company that has been clean for decades suddenly turn non-transparent? Calling the kettle black, finally, may be good for stakeholders. But should the “pot” go scot free?
Business Is Booming
Remember, most big audit firms have multiple sources of income today and they wouldn’t want to jeopardise all of this for a few small black kettles. The biggest beneficiary of the Goods and Service Tax regime introduced last year has been the accounting professionals. What’s more, with several scams being unearthed and the introduction of the Insolvency and Bankruptcy Code, 2016, the demand for forensic audits has swelled. So, now the forensic auditors get paid for the work the auditors, their own peers, should have done right. That’s swell.For shareholders, though, the way the wind is blowing now augurs well. There might be some short-term pain, but we seem to be moving towards an era of greater accountability. And that’s a good shift — from accounting to accountability.