The countrys apex audit body Comptroller and Auditor General of India (CAG) has called for an increase in fees paid to statutory auditors of all government companies. In a communication sent to managing directors of public sector undertakings (PSUs), the CAG said that with high inflation leading to audit cost escalation and increased compliance burden on auditors, it was prudent that the fees paid to auditors should be raised.
Considering the volume of work, category of professionals deployed, growth in companies and rise in cost of audit due to inflation, it is necessary that the audit fees are increased, a CAG official told ET, requesting anonymity.
While it is for the managements of the respective companies to take a call on the issue of fixing audit fees, a missive from the CAG is likely to be taken seriously by PSUs, the official said. There has been negligible increase in audit fees paid by PSUs over the past few years.
The CAGs suggestion on increasing audit fees follows a series of correspondence it carried out with the Institute of Chartered Accountants (ICAI) which has been pushing for a hike to make the job of carrying out statutory annual audits for PSUs lucrative for the domestic CA firms.
Statutory audits of big PSUs often involve more than one CA firm. For instance, NTPC had engaged 6 firms in last years annual audit while IOC and ONGC had employed 3 and 5 audit firms respectively. Although larger firms are more generous with the fees paid to auditors, the problem lies with the smaller PSUs which shelve low amounts.
We take PSU audit as our responsibility to the society and not as an opportunity to make money. But with the cost of compliances increasing, we feel that adequate compensation should be given to PSU auditors, said ICAI president Uttam Prakash Agarwal.
He said that with greater compliances being undertaken to keep up with the stricter norms introduced by the CAG last year, there was a need to adequately compensate auditors for it.
With PSU audit fees often as low as Rs 20,000-25,000, the increase in the fee structure will surely improve quality of the audit process, another official said. Since government auditors are being paid substantially lower fees as compared to CAs working in the private sector, the CAGs proposal, if taken in the right spirit, will help enhance the quality of audit in PSUs.