The Enron fiasco at the turn of the century gave birth to a landmark Governance Act in the US, the Sarbanes-Oxley Act of 2002. That in turn created the Public Company Accounting Oversight Board or the PCAOB, a private sector nonprofit cooperation that oversees auditors of public companies in order to protect the interests of American investors.

Isnt it time for countries like India to think of adopting this best practice and instituting an independent super regulator for the audit fraternity? In India, The Institute of Chartered Accountants of India sets the ICAI audits standards. A statutory body, the ICAI, was set up in 1949 and its primary function is to regulate the profession of Chartered Accountants and then prescribe accounting standards. An elected council of Chartered Accountants runs the ICAI. Only ICAI registered accountants are allowed to audit Indian firms.

So does India need an independent regulator of audit firms?

On this, Ved Jain, President, ICAI said, There is no need because we have a body better than PCAOB at one stage. We as an institute regulate the profession, we are overseeing it then we have a Quality Review Board, we are overseeing it, we have a Peer Review Board and then we have on top of it Financial Reporting Review Board where we review the balance sheet and financial statement of all the corporates.

Rajesh Kapadia, Partner, GM Kapadia & Co said, If we have not been subjected to a Peer Review, it would automatically become a disqualification and in fact all your prescriptions, which are there under the PCAOB or under the Sarbanes-Oxley Act find place at some place or the other in all the regulations that I have mentioned here.

Natrajan Ramkrishna, Partner, Audit, BSR & Co said, There is a very significant difference between what the PCAOB does and what the institute does. For example, the institute typically looks at financial statements and looks out for deviations whereas the PCAOB will visit your accountants office, the chartered accountants office and carry out extremely detailed review of files for extended periods of time to ensure that the chartered accountant has complied with the documentation standards and other auditing and accounting standards prescribed by various accounting bodies. So to that extent, it is a far more effective process.

On the other hand, HP Ranina, Tax Advocate said, Certainly it would add value in that sense there is no doubt about it and whether it is a large firm, the middle sized firm, small firm all the auditors who certify these type of accounts would have to make sure that the guidelines laid down by this body are met with. So, any regulatory authority is good but at the same time one must keep in mind that there cannot be overlapping.

Kapadia feels that it would only mean an additional level of compliance, which will be there. Whereas, Rahul Roy, Director, Ernst & Young said, What does the layman who is not an auditor, who is not a company perceive? He perceives the institute, which is educating its members, disciplining its members, and setting up standards.

So, should there not be an independent oversight body as there is in other countries. For example, PCAOB in USA is there though the AICPA institute runs the profession. ICAI has been handling things wonderfully. However, perhaps increasingly that is inevitable from a perception point of view.

On this Ramkrishna said, It is not necessary that all this sort of autonomy and control would lead to better quality of work and better corporate governance. The subprime crisis, the number of deviation that we observe in the USA is sufficient proof of the fact that all these controls at the end of the day have limited applications and what is important is an effort on the part of the institute to genuinely improve quality of work.