ICAI wants CAs to act as whistleblowers against corporate fraud
05 Jun 2025

The Institute of Chartered Accountants of India (ICAI) is working with the Securities and Exchange Board of India (SEBI) on proposals aimed at early detection of corporate frauds in listed companies.

The proposals suggest that chartered accountants (CAs) and auditors, who regularly interact with company management, should alert regulators if they suspect fraudulent activities.

This could be based on signs like sudden spikes in borrowing or related party transactions.

CAs can help tackle corporate fraud
Whistleblower potential

The proposals highlight the potential of CAs to play a major role in tackling corporate fraud. They are privy to several developments within a company.

There have been instances where CAs have acted as whistleblowers, but the need for a more formal and structured approach is being emphasized.

Auditors can also detect possible frauds through their interactions with company management.

Fraud prevention can help protect public shareholders
Regulatory perspective

SEBI believes that if frauds are prevented or detected early, companies can be spared damage. This would ultimately protect thousands of public shareholders from potential losses.

Last month, ICAI President Charanjot Singh Nanda met SEBI Chief Tuhin Kanta Pandey and said the institute would form a working group to discuss various proposals with the market regulator to combat fraud effectively.

Regulators have struggled with corporate fraud
Data analysis

ICAI also plans to analyze past corporate fraud data to identify various patterns in such fraudulent activities.

This comes as regulators in India have struggled with corporate fraud, both in listed and unlisted spaces.

In a recent case, the alleged fraudulent activities by promoters of Gensol Engineering were detected by SEBI nearly two-and-a-half years later, with funds transferred in FY23 and FY24.

Other enforcement agencies are also probing cases
Inter-agency collaboration

Other enforcement agencies have also been working closely with SEBI in tackling corporate frauds.

The Serious Fraud Investigation Office (SFIO) under the Corporate Affairs Ministry is probing over 70 cases.

The National Financial Reporting Authority (NFRA) also looks into corporate frauds from an auditor's perspective.

Nanda has said ICAI will form a research group to identify areas where meaningful discussions can be held with SEBI, emphasizing the importance of ensuring investment safety.