Any SMP with Gross Annual fees income of Rs. 25L and manages to get any audit assignment from a mid-sized group with fees above Rs 5L then it was easily possible prior to 30/06/2020, since such assignment was less than 40% of total fees as per earlier code which had been in force since inception.

Now, from 01/07/2020 as per new Code, the members will have to compulsorily report to the client if the assignment crosses 15% for previous and current year. Also from next year onwards an independent auditor will review the work of SMP which shall be an awkward position for SMP apart from incremental cost burden, Otherwise, SMPs will have to wait till they get a few other big assignments to be within 15% criteria. By extending the same logic, an audit assignment of 15L can practically be undertaken only by firms having revenues of 1 Cr. without any reporting-audit hassles. Please read Section 410 Sub-Clause R 410.4 for better understanding of these provisions.

Being the second largest accounting body in the world, we have a large pool of CAs but still India being a developing nation, we have very few large clientele of global size due to which there is already a huge competition. Nobody is aware about changes in the recent past which forced ICAI to reduce the limit from 40% to paltry 15%. For sure, this clause may not impact Big4 but freshers and SMPs will face major difficulties to survive and grow in practice.

Due to Covid-19, this clause is temporarily deferred, but it will be implemented soon when the situation returns back to normal. Perhaps, members may share their learned views if the above understanding is correct? If yes, whether such clauses should be implemented or scrapped in the larger interests of freshers and SMPs?

As regards, another novel provision about “Outstanding Fees” from clients, we shall discuss in the next series. ~ CA Unmesh Narvekar – 9821236179. EMAIL: [email protected]

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May 2021