The Global Trust Bank management had given marching orders to PricewaterhouseCoopers as auditor of the bank after the publication of the 2002-03 results. 
 
After auditing GTB's results for 2002-03, PwC had stated with the financials: "In our opinion, the balance sheet, profit & loss account and cash flow statement of the bank are in compliance with the applicable accounting standards referred to in subsection (3C) of section 211 of the Companies Act, 1956, of India to the extent applicable and in so far as they are not inconsistent with the Banking Regulation Act, 1949 ..." 

The GTB Crisis: Complete Coverage

It, however, pointed out that notes on accounts regarding additional provision towards non-performing assets by utilisation of statutory reserves below the line after the net loss for the year not in conformity with the accounting principles generally accepted in India. 
 
It also drew attention to Note 10 of Schedule XVIII regarding preparation of accounts on a going concern basis even though the net worth of the bank has been substantially eroded after considering the loss for the year on account of substantial provision against non performing assets, taking into account management's assessment of growth of business, infusion of capital through strategic/ financial/ investment/ issue of further capital. 
 
"Accordingly, these accounts do not include adjustments in case the management's business plans do not materialise," it said. 
 
The report also had the statutory declaration that "these financial statements are the responsibility of the management of the bank. Our responsibility is to express an opinion on these financial statements based on our audit." 
 
"We have conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion," it said. 
 
Regarding restructuring of certain advances subsequent to the year-end aggregating Rs 311.61 crore (Rs 3,116.1 million), the audit firm said provision has not been considered necessary by the management, as advances are fully/ substantially secured and interest has been serviced till March 31, 2003, on restructuring. 
 
It also said that non-banking assets to the tune of Rs 181.75 crore (Rs 1,817.5 million) acquired in satisfaction of debts held for long term pursuant to section 9 of the Banking Regulation Act, 1949 for which, no provision is considered necessary by the management. 
 
PwC was replaced by M Bhaskara Rao & Co following this remark: "The accounts of the bank have been prepared on a "Going concern" basis even though the net worth has substantially eroded after considering the loss /for the year (2002-03) on account of substantial provision against non-performing assets, taking into account management's assessment of growth of business, infusion of capital through strategic financial investment/further issue of share capital." 
 
M Bhaskara Rao & Co which audited the quarterly results for 2003-04 had also raised questions on the going concern status of the bank. It made a qualification for the third quarter of 2003-04 which said, "Despite the networh of the bank being considerably eroded it was considered a going concern." 
 
Questionnaires sent to GTB a couple of months back on the issue remained unanswered. 
 
Meanwhile, at a board meeting on September 23, 2003 J V Shetty (of Canara Bank) and S B Ghosh, both independent directors, had intimated the board regarding their inability to continue on the board of the bank. 
 
As advised at the board meeting held on September 23, 2003, the managing director held discussion with Shetty and Ghosh. Accordingly, the board at its meeting held on September 29, 2003, accepted the resignation of the two. 
 
Rathin Dutta, head of PwC, refused to comment on the issue when contacted by Business Standard on Sunday.