Rating firms aren't forensic accountants: Amish Mehta, CEO, Crisil

Crisil's chief executive Amish Mehta said that the rating firm's work depends on the findings of the auditor, who has greater access to information and the disclosures made by rated companies. Speaking to ET, he also pointed out, without naming any borrower, that a sharp stock price movement does not mean they have to put out statements on the rated issue, but if a 'material event' is triggered, Crisil has consistently issued statements in seven days. Edited excerpts:

What are the additional steps Crisil has taken to ensure the data provided by rated companies are genuine and authentic?
First and foremost, we are not forensic accountants. The way we carry out our business is, we have a contractual arrangement with the issuer to rate based on the information they have furnished to us, which is essentially audited, and management interaction. Separately, we try to triangulate that with publicly available information, benchmarks with peers, talk to bankers, and look at GST data.

An auditor is someone who has greater access to information of the company signing off on those documents. We rely on that.

One key reflection is the default rates or the sharp rating actions. Maybe ten years ago, the default rates that rating agencies used to put up were higher than what they are reporting now. Even the sharp rating action has come down.

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One thing is clear if somebody does something with an intent to fraud and misrepresent, I think it is very difficult for auditors, regulators, or intermediaries like rating