In order to restore credibility in the Satyam-tainted work of auditors, the Institute of Chartered Accountants of India (ICAI), the apex body that regulates the profession of chartered accountancy in India, is considering various options, including demanding more powers for itself.
The institute needs to have more teeth and there is need to make changes in the regulations, said Uttam Prakash Agarwal, president of ICAI. A group of three-four ICAI members is in regular touch with the Ministry of Corporate Affairs to work out the modalities, Agarwal added.
Under the present system, the ICAI cannot take action against any chartered accountant (CA) who has indulged in professional misconduct but is not a member of the institute. The institute can take action against only those CAs who are its registered members.
Besides, in case there are deviations in any companys accounts, the ICAI can seek information from the CA concerned but not from the firm.
Also on agenda is giving more powers to auditors so that they can refuse signing a companys accounts if these are found to be not in order. In the present system, if auditors are not satisfied on matters that are material to the financial statements, they qualify their audit opinions accordingly.
Another initiative that the ICAI has taken is on the issue of managerial autonomy to public sector banks in the appointment of auditors. Both public sector banks and private sector banks auditors should be recommended by the Reserve Bank of India (RBI) and board of directors should not be given the powers to appoint auditors, Agarwal said.
The ICAI is in talks with the RBI and finance ministry on this. Independence of auditors is important and granting managerial autonomy to banks in the appointment of auditors would erode the independence of auditors, said Agarwal.
Until three years earlier, the RBI used to allot branch auditors, based on a panel of firms submitted by the ICAI. But, since then, it has liberalised the norms and has allowed banks to select their own auditors. Over 20,000 audit firms are involved in the exercise.
Also on the anvil are joint audits and a scheme of rotation of auditors to bring in more accountability in the system. We have been getting various proposals on this and discussions are on, said Agarwal.
To bring internationally followed best practices and a new code of conduct, the ICAI is planning to set up a rating system for corporate governance.