The audits of government schemes like the national rural employment guarantee act by professional auditors will be subject to peer review, accounting regulator the Institute of Chartered Accountants of India (ICAI) has said. The government is in the process of selecting audit firms through a tender process where the assignment will be awarded to the firm quoting the lowest fees.
The ICAI feels the method of selection runs the risk of compromising the quality of audit.
“The process of selecting a firm through the tendering process can kill the concept of audit,” said Amarjit Chopra, president, ICAI.
We will ask members to avoid quoting abnormally low prices and the process of peerreview will ensure that their quality of service is not jeopardised , he added. The tender process for auditing social sector schemes has often raised concerns over the quality of audit, as firms bid too low a price for procuring the auditing work of such schemes, which help raise their profile. “Low prices certainly are a cause of concern for us keeping in mind that the actual cost of such audits is higher,” said Chopra.
The firms auditing these schemes will have to maintain a comprehensive cost sheet that will include details like the number of people engaged by a firm on its assignment and the cost incurred on the work that they do. The Comptroller and Auditor General (CAG) of India is already seized of the matter and is even considering fixing the audit fees, an official told ET. The government wants to use the services of private chartered accountants to audit its social sector schemes under the overall guidance of the CAG. Most social sector schemes, such as the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), Sarva Siksha Abhiyan and MGNREGA, have poor audits despite government spending thousands of crores on them.
Peer review is a process of evaluation of a firm’s audit performance by others in the same field in order to maintain the quality of performance. It is considered an effective way to tackle lack of indiscipline, as no professional wants to be shown down by its own fraternity.