Accounting regulator the Institute of Chartered Accountants of India (ICAI) has asked the government to make outsourcing of internal audit functions mandatory for companies to prevent a Satyam-like fraud from happening again.
The suggestion is part of the recommendations by a high-powered committee of ICAI to the Corporate Affairs Ministry in the aftermath of a Rs 10,000-crore scam in Satyam Computer and is intended to strengthen the internal audit system of companies.

“We have recommended that internal audit should be outsourced rather than in-house because internal audit in-house is always dependent on the management of the company. Internal audit from outside will always be better, and then it should be given to chartered accountants, ” ICAI President Amarjit Chopra told.

The role of internal auditors came under scanner after Satyam Computer founder B Ramalinga Raju confessed to having cooked the books of the company for years. The IT firm’s internal audit head S Prabhakar Gupta was arrested for his alleged role in the multi-crore fraud.

Interestingly, Satyam’s internal audit team was given recognition of commitment award by the US-based Institute of Internal Auditors in 2006.

Chopra further said that since internal audit is the first check-post for any accounting fraud, due care should be taken to ensure it is conducted by the right people and independently. “We already have 17 internal audit standards and we have asked the Government to make these standards mandatory for internal audits, whether through Sebi or through company law, so that there is standardisation of internal audit procedures,” Chopra said.

The standards are benchmarks for internal auditors and are aimed at ensuring standardisation, independence and more consistency in the functioning.

They also differentiate auditor’s responsibilities when it comes to complying with the law and regulations that have direct impact on financial statements as well as significant effect on the functioning of the company.


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  1. swaminathan says:

    Outsourcing IA is very bad decision and about 4000 CAs will loose job. All CA working in IA should protest this kind of decision.

  2. Partha De says:

    I fully agree with the proposal.
    mandatory rotation of independent directors.and app mechanism to appoinment/removal and fixing remuneration should also be enforced too. In a bargain market the management can engineer anything.

  3. v swaminathan says:

    For what one knows or could gather from known sources, there is presently no comprehensive or foolproof enactment mandating internal audit for companies as such. Be that as it may, for an insightful understanding of the subject matter of the write-up in a wholesome manner, a host of available material and articles posted in public domain might be of useful guidance-

  4. Sridhar says:

    Why the so-called independent statutory auditors have failed to discharged their duties diligently?

    Whether it is inhouse or outsourced it all depends upon the quality of the individuals/ team?

    Can it be inferred that institute does not have trust on its non-practising CAs who are employed as internal auditors in companies?

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February 2024