Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: cpt :: ARTICLES ON INPUT TAX CREDIT IN VAT :: form 3cd :: ACCOUNTING STANDARDS :: due date for vat payment :: VAT RATES :: Central Excise rule to resale the machines to a new company :: VAT Audit :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARD :: list of goods taxed at 4% :: articles on VAT and GST in India :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: TDS :: empanelment
General »
 Simplified one page Income Tax Return Form: Changes to keep in mind before filing tax return for AY2017-18
  No proposal to replace Income Tax with Banking Cash Transaction Tax
 GST coming July 1 despite calls for delay: Revenue Secretary Hasmukh Adhia
 Centre introduces provision of taxation on NPS in Income Tax Act
 Income Tax Department Clarifies On Cash Withdrawal From Banks, Post Offices
 The Goods And Services Tax (Compensation To States) Bill, 2017
  Goods and Service Tax (GST) and Real Estate Sector
 New Income Tax Rules On Home Loan Come Into Effect
 Here's how late filers can save on stress and taxes
 Clarifications on the Taxation and Investment Regime for Pradhan Mantri Garib ?Kalyan Yojana, 2016
 Companies should invest in upgradation of tax technology

Confusion reigns over Sebi's peer review mandate
May, 04th 2009

The compulsory peer reviews of auditors notes for Sensex and Nifty companies for Q3 results of the last fiscal and full-year results of 2007-08 have proved a virtual non-starter, owing to confusion over its scope and the appointment of auditors.

Peer reviews were mandated by the Securities and Exchange Board of India (Sebi) on January 9 as an investor confidence-building measure two days after Satyam Computer founder Ramalinga Raju confessed to inflating profits for several years.

The review was to cover the working papers of auditors for companies constituting the National Stock Exchanges Nifty 50 index and the Bombay Stock Exchange's benchmark 30-share index Sensex and was due to be completed by the end of February 2009. Two months after that deadline, peer reviews are yet to begin or have just started for some companies.

The principal problem is the interpretation of the exercise. At a recent seminar on corporate governance in Delhi, former Sebi chairman M Damodaran said the peer review was being interpreted as a second, detailed audit.

This is leading to a situation in which if I am tasked to look into what somebody has done, I believe I will be earning my fee only if I find some inadequacies in the previous attempt to audit... The second guy has to be better than the first, Damodaran said.

As a result, in some cases, managements are being asked questions that appear irrelevant to them. Its a duplication of efforts and costs, said Manish Dugar, CFO, Wipro Ltd. Many of his fellow CFOs shared these concerns at a recent CFO forum.

Arun Gandhi, director at Tata Sons and a leading chartered accountant, said defining the scope of review was important to avoid confusion, since the audit notes of the statutory auditor were being subject to examination by another firm, which could also raise issues of confidentiality. Its important to ensure that both firms are on the same plane, Gandhi added.

The reviewer is expected to examine the working papers (of the first auditor) to determine whether the information needed to conduct a reasonable audit was made available and used. The reviewer also has to establish if the audit was conducted according to the standards laid down by the Institute of Chartered Accountants of India (ICAI), the regulator for the profession.

An independent assessment of the quality of audit will enhance faith in the system and processes. If some people are looking at it as a second audit, they have grossly misunderstood it, said Shailesh Haribhakti, chairman of audit firm BDO Haribhakti.

Its a good measure. But we should not flog it to a level that it becomes counter-productive, Damodaran warned.

The peer review was proposed by ICAI for three years. Right now, it is mandatory for Sensex and Nifty companies, but Sebi will also choose a few listed companies randomly for this exercise.

The review is also running behind schedule because of a delay in appointing the auditors, which entails a long process to ensure there is no conflict of interest.

Sebi first sends a company a list of three audit firms to check for conflict of interest. The company will then write to its statutory auditor to check if it has a conflict of interest with any of the names proposed. If an audit firm has done work for a client of the company concerned or is auditing its competitor, it will be ineligible for the review.

A conflict can also occur if one of the reviewers employees has been employed by the original auditor or if the two auditors have had an alliance or jointly bid for some assignment.

Once the auditor responds, the company reverts to Sebi. This process can take two or three weeks or more. Most companies went through this process in March. Companies have also been trying to finalise their annual accounts, said Rahul Roy, partner, S R Batliboi and director, E&Y.

This selection criteria have led to problems in many sectors. Take the IT sector. It is difficult to find an audit firm that has not audited another IT company. Even if you find one, not everyone can understand a complex foreign exchange transaction, said Jamil Khatri, head of accounting services, KPMG.

Banks face a similar problem. You have to find an audit firm that has not audited any other bank before. This would leave only the small audit firms, which may not understand the issues. Many firms are getting conflicted out because they would have done some tax or advisory work for these companies, added Khatri.  Zeroing down on the right audit firm is taking time but once the auditors are appointed, Haribhakti thinks the process should not take more than two weeks. Even so, investors should not mind that if they can be reassured of India Incs numbers.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Application Management Solutions Application Management System Application Management Software System Application Management Development Application Management Software Development

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions