On 29 May, construction and infrastructure firm Atlanta Ltd announced that Price Waterhouse Chartered Accountants LLP (PWC) had resigned as the company’s statutory auditor. In the three days that followed, the company lost a third of its market capitalisation, wiping out over Rs 177 crore ($26.2 million) of the company’s value.

According to filings with the stock exchanges, PWC claims that it took this drastic step as Atlanta had withheld information about an ongoing income tax investigation into the company. Additionally, PWC’s letters state, the company did not immediately inform it about the resignation of one of the independent members of the company’s audit committee. Atlanta, in its response, refutes these allegations.

According to PWC, the company only provided PWC with this information on 22 May—a week before the company’s board meeting to take up the quarterly results. After initially asking Atlanta to defer the board meeting so they could figure out a way forward, PWC eventually decided that they were not in a position to adequately and accurately assess Atlanta’s financial statements. As a result, they walked away.

This isn’t even PWC’s first mid-term exit this year. Earlier in May, the firm had resigned from technology firm Vakrangee Ltd, flagging concerns with the company’s books of accounts to the Ministry of Corporate Affairs. Atlanta wasn’t even PWC’s most recent exit, as the firm parted ways with Edelweiss Finance on 31 May. Unlike with Vankrangee and Atlanta though, the Edelweiss resignation was by mutual consent.

This trend isn’t unique to PWC. Audit firm Deloitte Haskins & Sells resigned as statutory auditor of beverage maker Manpasand Beverages Ltd. In fact, in the first five months of 2018, 32 auditors have resigned from listed companies. This is almost at par with the number for all of 2017 (36), which itself was double that of the previous year. These firms have cited reasons ranging from suspicious books to time constraints. Are these resignations a sign that India’s auditing firms have suddenly developed a conscience? Is it fear? Or, perhaps, a combination of the two?

To answer that, we need to wind the clock back to a simpler time.

Bad apples

In the various strategies that play out in the stock market, whether based on technical or fundamental analyses, everybody relies on the sanctity of the numbers in companies’ financial statements. The signature from an auditor’s pen sanctifies these numbers. More specifically, a statutory auditor’s pen.

Once an auditor has signed off on the balance sheet and profit and loss account of a company, investors can begin to plan their next move.

Such is the weight that a statutory auditor carries, and this makes her responsible to stakeholders like lenders, government and, of course, shareholders. It’s an enviable position, and one of immense responsibility.


Vivek Ananth

After dabbling with an auditing job and then at a software product company, Vivek Ananth has decided to take the plunge into journalism. In his last assignment, Vivek was at Cogencis, a financial newswire. A Chartered Accountant, Vivek completed his post-graduate diploma in journalism from IIJNM Bengaluru in 2016. At The Ken, Vivek will write on the intersection of technology and business.

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