The self regulatory body for auditors, Institute of Chartered Accountants of India (ICAI) is pushing for compulsory rotation of auditors by companies amid mounting pressure from local financial institutions. A high-powered committee is currently examining the option and a decision will be taken, based on their recommendation, very soon, ICAI president Ved Jain told ET.
To begin with, ICAI is likely to ask auditors of top-listed companies to retire after a three-year term, he said. At the next stage, a mandatory rotation of auditors would be proposed for all public interest entities like private banks and insurance companies, Mr Jain said.
Currently, only public sector banks are required to rotate auditors, appointed from among RBI-empanelled list of audit firms, but there is no compulsion on private banks and insurance companies to follow the practice.
Industry insiders, however, feel that even if ICAI makes rotation of auditors mandatory, it may not help unless it is enshrined in the Companies Act or enforced as a regulator requirement by Sebi and Company Law Board. If ICAI can make it mandatory for its members to retire every three years, auditors will not have a choice but to adhere to it. But an amendment to the Companies Act will institutionalise the process, a chartered accountant said.