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Asserting that auditor independence is not under threat in the current corporate milieu, the CA Institute President Prafulla Chhajed has said that the profession continues to rest on the foundation of ‘independence’.
Auditors resigning from listed companies in the recent past — where there were differences with the management — is good testimony that no compromises are being done in such situations, Chhajed told BusinessLine , ahead of the 70th Foundation Day of the CA Institute on July 1.
“Independence has been my hallmark and I can’t compromise on it. The ICAI will ensure that no member compromises on independence, which is the prime pillar of the profession,” he said. Of late, there have been several instances of audit firms, including the Big 4, resigning as statutory auditors when they felt that the management is not sharing complete information about the financial affairs of the enterprise.
Chhajed maintained that adequate mechanisms exist within the CA Institute for proper monitoring and review of the work of members. There is peer review mechanism, financial reporting review board (for listed companies) and Quality Review Board which does the needful as regards monitoring and ensuring quality of work, he said. Chhajed also did not see any merit in housing any of these mechanisms outside the ICAI, say within the confines of the newly set up National Financial Reporting Authority ( NFRA).
“It (these mechanisms) has to be within ICAI as it will be difficult for an outsider to understand. Going outside will not serve the purpose. ICAI involvement in the entire monitoring and review process is zero. Even I as President can’t influence the process in these independent mechanisms,” Chhajed said.
He, however, declined to comment on NFRA and whether the CA Institute’s regulatory powers now stand clipped with the setting up of the new Authority. “I don’t want to comment as the NFRA matter is subjudice (before Delhi High Court),” he said. Chhajed also declined to comment on the likely regulatory action on the auditors of IL&FS, stating that the matter too was sub-judice. It may be recalled the CA Institute had suo motu initiated disciplinary investigation on certain Indian affiliates of the Big 4 involved in the IL&FS Group audit.
Monitoring group
With several Government assignments now getting awarded through the tender route due to CVC guidelines,the CA Institute has now decided to set up a ‘tender monitoring group’. The whole objective is to see if the audit firms are compromising on the quality of work and whether the price quoted by them are commensurate with the scope of work, he said.
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