The Hindu Business Line : Non-audit services issues — `Govt committed to independence of CAs'

In order to ensure independence of auditors, the concept paper for simplified Company Law now seeks to ban auditors from offering certain non-audit services, which would be mentioned by the Government from time-to-time.

Though the regulatory intent of the Government is to ensure independence of auditors, it has triggered off a debate amongst auditing professionals, including the big four - Ernst & Young, PwC, KPMG, and Deloitte - on the issue. The Institute of Chartered Accountants of India (ICAI) had specifically mentioned that non-audit service would include management consultancy and all other professional services permitted by the Chartered Accountants Act, but would not include audit under any other statute, certification work required to be done by the statutory auditors and representation before any other authority.

When asked if the Government will go soft on this provision, Mr Prem Chand Gupta, Minister for Company Affairs, told Business Line: "The Government is committed to independence of auditors. We will wait for response of all the stakeholders on this along with other issues in the concept paper before forming an opinion."

"A total ban would also increase the cost of such services to corporate world. Therefore, such services should be properly regulated - as to what services can be performed and what are appropriate safeguards for the same so that the conflict of interest could be best avoided," accountancy professionals said.

According to Mr Sunil Goyal, President, ICAI, whether or not audit firms should perform non-audit services is a contentious issue, which came into focus after the collapse of some corporate giants in the US. The issue involved is the independence of the auditor and conflict of interest, if any, while performing the non-audit services.

"I endorse the view of ICAI which has all along required that the auditors should not undertake non-audit service engagements."Further, in order to check any perceived threat to independence, the Council of ICAI, as a regulatory requirement has stipulated that the fees from the non-audit engagements in specified cases should not exceed the audit fees.

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