The Institute of Chartered Accountants of India (ICAI) is considering mandatory rotation of partners in an audit firm and is toying with the idea of capping a partners association with any one company at seven years.
New Chapter ICAI mulls capping a partner's association with any one company at seven years The proposal aims at pre-empting collusion between a company and its auditor Move to hit all single-partner outfits that comprise 70% of all CA firms in India
The moveaimed at pre-empting collusion between a company and its auditorhas far-reaching consequences for firms that have not changed their auditors for decades. It will also be a big blow to all single-partner outfits that comprise 70% of all chartered accountancy firms in India.
ICAI, the apex body for the accounting profession in India, had wrapped up the consultation process and would be taking the matter up at its council meeting in July, Harinderjit Singh, member, ICAI Central Council. A rotation of partners on assignment was being considered as part of quality control, he said.
The idea of rotating either audit firms or their partners for listed companies and for non-listed firms having public interest was mooted by the ICAI in 2003, especially after a series of corporate fraud. It was referred to a committee which was to work on it, keeping in mind global practices, industrial perspective and logistical issues.
A draft on this was issued and it was also considered by the Assurance and Auditing Standards Board.