The government is likely to ask all departmental enterprises and agencies, such as the National Highways Authority of India (NHAI), to dispense with the system of tender-based appointment of internal auditors. Instead, the Comptroller and Auditor General of India (CAG) and the Institute of Chartered Accountants of India (ICAI) will jointly finalise a panel of eligible audit firms for different categories of projects and entities, based on the project size, number of locations and turnover. For each category, there will be a fixed fee and the agencies will be free to select any auditor from the panel.
For instance, the CAG-ICAI team will formulate eligibility criteria for audit firms to participate in auditing projects that come under various categories such as: up to Rs 100 crore, Rs 100-200 crore and Rs 200-500 crore, and empanel firms for each sector. The minimum fee for each sector will also be fixed by the joint mechanism that will be set up by CAG and ICAI. This, government officials said, will help reduce instance of unhealthy auditing practices.
ICAI has been complaining that many of its members are quoting unrealistically low amounts and this opens up the possibility of them colluding with the agency whose projects are being audited.
AUDITING THE AUDITORS
# Government agencies like NHAI may be asked to stop tender-based appointment of auditors
# CAG, ICAI to prepare a panel of eligible auditing firms
# ICAI says many of its members were quoting unrealistically low fees to win auditing assignments
# Agencies to select auditors from panel at pre-determined fees
The institute had recently raised the issue with CAG and other government agencies, such as the Planning Commission, seeking a change in norms. It had pointed out that agencies such as NHAI and the Organising Committee for Commonwealth Games were following the system of awarding audit work to firms that quoted the lowest fees, known as L1 in official parlance.
“We have raised our concerns about issues such as deposit of earnest money and the system of L1 tenders, as chartered accountants’ are professionals whose services cannot be sought in that manner,&” Amarjit Chopra, president of ICAI, said. According to him, “acceptance of lowest tender is not desirable in all the cases, as there could be compromise on (auditing) quality&”.
CAG, officials said, had in turn discussed the matter with the Planning Commission, which has said that it is not averse to the proposal. The new mechanism is expected to be in place over the next six months.
It is a welcome step. But to ensure the interest of small firms, it should further require refinement. Because liberty to select firms from the panel will tend to the selection of big firms.
It is a welcome step. But to ensure the interest of small firms, it should further require refinement.
It should be ensured that the Internal Audit works should not be concentrated in few hands say big firms only. As such the system needs equitable distritution arrangement either at CAG level or at the level of the CA Institute otherwise small firms/individual CA`s will be sufferes.
The commentators all have been conspicuous in failing to point out the real howler. The useless core body called the ICAI boasts of being the statutory controller of the profession of CAs (though the past history of some of its most powerful, influential and successful members/office bearers deserve SFIO investigation), and has even prescribed the rates that “must be charged” by the CAs for their professional work. Forget the main breadgivers-the private sector- but even the holier-than-thou CAG does not even bother to honour these retes and the PSU Companies and Banks as well as the State Govt. bosses treat the CAs as petty job seekers while “fixing” piece rates for the audits awarded to them. Of course after getting in advance their rightful cuts. So, why aqll this furore over tenders? Even in the oldest profession of the world this system is prevalent-what is the harm if bread givers insist that beggars can’t be choosers? Tender or no tender, the situation will remain the same, with the history/track records of some of the past stalwarts in the ICAI and their present exalted positions/proximity to seat of power. Nothing after all succeeds like success-in all spheres of life/profession.
Correct.Sending once again for testing.
Well this is welcome step for a short term vision. It needs more transparancy while selecting an Auditor from panel without any lobbie.It should consider all factors like quality of professionals,track record of audit firm,location based audit cost like urban and sub urban basis,maximum audit limits for each firm to get opportunity to other firms and also require to implement effective norms to avoid manipulation tends corruption and would loosing brand from all fronts like bright example of Satyam Scandal etc.At the same time Government should look at other options to get more competitive in auditing practice in place by including other competent professionals like CSs and CWAs firms aswell.As we know where is monopoly,there is corruption and where is power there is chance of more indicipline in system due to autocracy nature.We should not take decision how much benefit to us but should think for others benefits always.
Ok.
Well this is welcome step for a short term vision. It needs more transparancy while selecting an Auditor from panel without any lobbie.It should consider all factors like quality of professionals,track record of audit firm,location based audit cost like urban and sub urban basis,maximum audit limits for each firm to get opportunity to other firms and also require to implement effective norms to avoid manipulation tends corruption and would loosing brand from all fronts like bright example of Satyam Scandal etc.At the same time Government should look at other options to get more competitive in auditing practice in place by including other competent professionals like CSs and CWAs firms aswell.As we know where is monopoly,there is corruption and where is power there is chance of more indicipline in system due to autocracy nature.We should not take decision how much benefit to us but should think for others benefits always.Thanks
Welcome this step of ICAI
It is indeed a very good proposal and will surely pave way for independence of auditors which is just in theory at present. If possible, the same mechanism may be adopted for appointment of tax audits U/s 44AB and for corporate audits. Practically, all appointments are made by the persons whose conducts are to be checked and audited, and we must keep one thing in mind that “ONE CAN NOT BITE THE HAND WHICH FEEDS HIM”.
This will also ensure equal distribution of works and it will not be centralised in a few hands who have proper liasion.
This should be made applicable to state govts also. Tender system did havoc with the audit of the Sarva Shiksha Abhiyan scheme and is continuing the same in the audits for the states as regards panchayats, corporations, etc.
It is a welcome step. But when the agencies are given option to choose the firms from a list on predetermined fees, then naturally they will opt only for the big firms. So what will happen to small firms and the new enterants. How will it be ensured that other chartered accountants will also get opportunities.
A good news for CAs; a long time wish of many CAs.is going to be fullfilled to avoid unhealthy competition.