New Delhi: The Institute of Chartered Accountants of India (ICAI) is seeking amendments to the Chartered Accountants Act to allow it to punish audit firms for malpractice as well as set timelines for disposal of cases against auditors, the regulator’s newly elected president, Atul Kumar Gupta, said.
The institute is also in favour of joint audits for large public interest entities as well as appointment of auditors for such entities by an independent panel as proposed by the Ministry of Corporate Affairs (MCA) in a consultation paper aimed at improving independence of auditors, Gupta said. “The ICAI should have the power to punish (audit) firms as well (for misconduct),” Gupta told ET on the sidelines of an event last week, adding that the institute was also seeking a provision in the CA Act mandating time-bound disposal of complaints against accountants and auditors within 12 months.
The MCA has sought the debarment of an audit firm over alleged lapses in the audit of IL&FS Financial Services. Gupta said the ICAI had proposed some of the measures recommended in the MCA paper. He said the ICAI had proposed that large “public interest entities” undergo a joint audit and that auditors for such entities be appointed by an independent panel in the way auditors are appointed by the Comptroller and Auditor General (CAG) for public sector enterprises and by the Reserve Bank for banks.
“There may be a panel which may be created by a regulator, which can do a systembased allotment of audits for public interest entities. It should be system based in the manner it is done by the CAG (for CPSEs) based on the number of partners, expertise, IT skills etc.,” said Gupta. The consultation paper published by the MCA has sought suggestions on a number of proposals, including joint audits for large companies and for auditors to be appointed by an independent agency.
However, Gupta said the proposal that auditors be barred from offering non-audit services might increase costs for small companies. He recommended that this proposal be restricted to large public interest entities. Gupta also said the ICAI had set up a sustainability accounting standards board, which would propose disclosure requirements from companies on efforts to meet the United Nations Sustainable Development Goals (SDG). The proposals will include requirement to disclose the proportion of CSR expenditure by a company conducted towards achieving the SDGs.
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