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KPMG to pay fine to escape going the Andersen way
Accounting firm KPMG has agreed to pay $456m to settle a federal probe of its sales of fraudulent tax shelters, avoiding a criminal indictment that might have crippled the firm.
While KPMG, the smallest of the major US accounting houses, itself escaped an indictment of the kind that destroyed Arthur Andersen when it was convicted of destroying documents, eight former partners, including its former deputy chairman, and a KPMG lawyer, were indicted for selling the tax shelters to wealthy clients.
It's the normal practice of Public accounting bodies that conducts audit of financial accounts and never do audit of cost records. This allows organizations with the help of audit firms to park fictitious cost into cost of production and to overvalue their stock. Even ISO 9001 multinational companies and owning sturdy software like ERP (Oracle/SAP) intentionally do not value their stock as per AS-2. Most of the the companies do not maintain appropriate records as per Cost Accounting Standards (CAS) recommended by The Institute Of Cost & Works Accountants Of India (ICWAI). Audit of financial accounts without relevance to the type of industry, is like driving a car with one eye, means you can drive but never safe. More so financial audit does not provide any value addition to organizations e.g. showing a way to reduce the cost and to be more competitive, rather lead to reduction of State exchequer by merely helping scammers in showing them the hiding place. Govt. should therefore allow professional bodies like ICWAI to audit and report on cost of production to ensure correct and fair view of cost. This will automatically reduce the scope for this type of malpractices and provide for more transparency in financial records. (Source: Reuters)
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