Limit on audits could pose practical difficulties, says ICAI
April, 02nd 2014
Limiting the number of firms that can be audited simultaneously by an auditor could create practical difficulties for the profession, accounting regulator ICAI has said.
Most of the provisions of the Companies Act, 2013, have come into effect from today.
The new law would bring more transparency in corporate governance and also allow flexibility to companies in exceptional situations, the Institute of Chartered Accountants of India (ICAI) said in a statement today.
However, it also said that anything new would pose certain difficulties but “we expect to overcome these challenges”. “As far as the limit of 20 audits is concerned, this is likely to create practical difficulties for the profession,” ICAI President K Raghu said.
With the technological advancement both in accounting and auditing, chartered accountants can serve and bestow personal attention to a much larger population than the limit prescribed, he noted.
An auditor can now audit not more than 20 companies at any given time.
The institute said rotation of auditors which has not been accepted across the world is now only restricted to certain class of companies leaving close to 90 per cent of the companies outside the scope of rotation.
“This will benefit small and medium practitioners and corporates,” it added.
Under the new law, auditors are also required to report suspected frauds at companies.
Noting that there are going to be practical difficulties in dealing with reporting on every fraud, ICAI said it was “looking at various possibilities and hope to resolve this issue in a practical manner soon”.
“The deferring of the constitution of National Financial Reporting Authority has come as solace to the profession,” it added.