The government has rejected Institute of Chartered Accountants of India (ICAI) move to insulate its members from non-compliance and corporate frauds. Ministry of corporate affairs (MCA) has decided to empower National Advisory Committee on Accounting Standards (Nacas) to set audit standards and perform quality checks.
The decision is broadly in sync with recommendations of the parliamentary standing committee on finance headed by former finance minister Yashwant Sinha.Online GST Certification Course by TaxGuru & MSME- Click here to Join
Sinha panel’s recommendations had been opposed by the chartered accountants body in an attempt to devolve itself of the responsibilities vis-à-vis the audits done by charted accounting firms and its members.
“Let us not forget that ICAI is a group of members and their prime motivation is to protect their members. Unless there are strong reasons, we would go ahead with the suggestions made by the parliamentary standing committee. We can not give preferential treatment to auditors,” said a corporate affairs ministry official.
Speaking about empowering Nacas, another MCA official added, “If auditors set standards, they can go free by setting lower standards for themselves. Similarly we will not allow auditors to provide managerial services in the same company they audit as this can be given by companies as an incentive to auditors and make them lose their independence.”
ICAI president Amarjit Chopra said, “We have suggested the ministry to make CA Act more stringent by increasing penalty amount and introducing imprisonment instead of introducing separate penalties and prosecution in Companies Bill.”
ICAI has suggested that rotation of auditors be introduced in phases for companies where public interest is involved and small and medium enterprises be exempted from rotating auditors every five years.