Enhancing audit independence: Ministry sets up 7-member panel

The Corporate Affairs Ministry (MCA) has constituted a seven-member committee to examine the comments received on the consultation paper floated by it for enhancing audit independence and accountability in the country.

The committee will examine the comments and make recommendations requiring any amendments in law, rules and standards to achieve the objective of enhancement of audit independence and accountability, official sources said.

The panel has been asked to submit its report by June 30. The committee members are: Amarjit Chopra, Past President of CA Institute; KVR Murty, Joint Secretary, MCA; PR Ramesh, former Deloitte India Chairman; Ajay Bahl, Co-Founder & Managing Partner, AZB Partners; Sridhar Pamarthi, Joint Director, MCA; NK Dua, Joint Director, MCA, and Atma Sah, Deputy Director, MCA.

It may be recalled that the MCA had earlier this year come up with a 20-page consultation paper seeking comments from government departments and regulatory agencies, besides others, by February 28 on wide ranging issues affecting audit independence including a proposal to prohibit audit firms from providing non-audit services to their clients, how to address the oligopoly of ‘Big4’ audit firms (economic concentration of audit) and making the National Financial Reporting Authority (NFRA) prepare a separate panel of auditors for appointment as auditors of listed entities.

Addressing ‘threats’

The consultation paper had sought to address five “threats” for auditor independence — self interest, self-review, advocacy, familiarity and intimidation. Comments were also sought over making joint audit mandatory for bigger companies, whether number of audits under one audit firm/auditor be reduced and whether the number of partners under one audit firm be reduced or fixed.

It also sought views on whether the holding company’s auditor must also review the working papers of auditors of subsidiary and make mandatory comment on the account of subsidiary companies.