To reinforce control over auditors, the government is planning to give the regulatorInstitute of Chartered Accountants of Indiamore teeth. Among the options being considered by the ministry of corporate affairs is to make it mandatory for a firm Indian or foreigndoing audit to get a no-objection certificate from the regulator before it gets registered as a company or a limited liability partnership (LLP).
The auditors would also be required to wind up their display proceedings in a shorter period of time.
Currently, any practising auditor has to register with ICAI in his/her individual capacity, and is answerable to the statutory body for his/her actions, but there is an absence of enforceable regulation on audit firms. This has been exposed as a major regulatory loophole after the Satyam scam, as the regulator largely looked helpless even as serious questions were being raised about the role of the global audit firm, PriceWaterhouse. According to a senior official, the Parliamentary Standing Committee perusing the Companies Bill has strong views about the lax audit regulation.
One of the suggestions of the committee is to extend the ICAIs arms to the audit firms also. Necessary changes could be made in Chartered Accountants Act, 1949 and also the Companies Bill, the official said.
In a recent interview to FE, the global chairman of PricewaterhouseCoopers, Dennis M Nally, had revealed the plan to amalgamate all partnerships and related entities of PricewaterhouseCoopers in the country with the parent organisation. The new regulations being planned would ensure that even as a company or LLP (both of which are centrally monitored), the firm will have to be answerable to ICAI for its audit-related activities in the country, even as the overall operations of the company/LLP would be governed by the government under the Companies Act/LLP Act, the official clarified.
Recently, the general council meeting of ICAI extensively discussed the issue of creating transparency with regard to the operations of foreign audit firms.
The councils suggestions would now forward its inputs to the ministry of corporate affairs.
When contacted ICAI president Amarjit Chopra declined to comment on the governments plan to amend the Chartered Accountants Act to give the regulator more teeth but said, We are very clear on one thing that foreign firms have to be made more accountable. Foreign audit firms like KPMG, Ernst & Young and PwC declined to comment on the issue.