The Hindu Business Line : ‘Regulators must have say on auditors for MFs, insurers’

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‘Regulators must have say on auditors for MFs, insurers’

Auditor choice should be patterned on public sector banks model, says ICAI.

Time to change
ICAI wants regulators to recommend the names of auditors from a panel approved by them.

K.R. Srivats

New Delhi, Jan. 13 Call this the Satyam effect. The regulators of mutual funds and insurance industry – the Securities and Exchange Board of India and the Insurance Regulatory and Development Authority may have a say in the appointment of auditors in asset management companies (AMCs) and private insurers.

The Institute of Chartered Accountants of India (ICAI) has decided to write letters to IRDA and SEBI, urging them to adopt a system similar to the one followed for appointment of auditors in public sector banks.

“IRDA and SEBI should recommend the names of auditors from a panel approved by them. From the names recommended to the management of these companies, the auditor should be appointed. This will strengthen the independence of statutory auditors,” Mr Ved Jain, ICAI President, told Business Line here on Tuesday.

Currently, IRDA and SEBI are not involved in the choice of the statutory auditor of a private insurer or an AMC. The statutory auditors in AMCs and private insurers are appointed by the shareholders based on the recommendations of the management. The auditor appointment is a contract between the shareholders of a company and the audit firm.

Although IRDA does not recommend auditors’ names to the management, sources said that the regulator does have specific guidelines governing the appointment of statutory auditor. “IRDA does have norms like the same firm cannot be auditor for more than a specific number of insurers,” sources added.

Mr Jain also said that there was no need for a body on the lines of US-based Public Company Accounting Oversight Board (PCAOB) to be set up in India.

“The Satyam (fraud) happened even after Sarbanes–Oxley was applicable to it and Price Waterhouse was governed by PCAOB. Our peer review process and quality review board are better than others. We are far more regulated …and better regulated as well. There is no need to have a PCAOB type body in India.”

ICAI has constituted a six-member high powered committee under the Chairmanship of Mr Uttam P. Aggarwal, Vice-President of ICAI, to examine the issues.

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