Audit quality not impacted by Covid-19: ICAI President

The Covid-19-induced lockdown has not in any manner affected audit quality in the country, ICAI President Atul Kumar Gupta has said.

None of the auditing or accounting standards had been relaxed because of Covid-19 and auditors have not been given any leeway from compliance with standards on auditing despite the challenges from the pandemic, Gupta told BusinessLine in an interview.

He highlighted that the CA Institute had issued a detailed auditing advisory on the topic ‘Impact of novel corona virus (Covid-19) on audit of financial statements for the financial year ended March 31, 2020’, which focuses on special considerations for auditors while conducting audits of financial year 2019-20.

The ICAI has also issued a series of auditing guidance covering specific auditing aspects – going concern, inventory verification, subsequent events and auditor’s reporting – to provide guidance to auditors under the Covid-19 scenario, Gupta said. All these steps including webinars and regular webcasts with focus on special considerations for auditors under the current Covid-19 situation have helped to maintain audit quality during this pandemic, he added.

Gupta said that ICAI has already impressed upon the Corporate Affairs Ministry (MCA) the need to develop Audit Quality Indicators. The newly set up Centre of Audit Quality (of ICAI ) is likely to be tasked to come up with the indicators, Gupta said.

Conflict of interest

On the recent MCA consultation paper to examine the existing provisions of law and make suitable amendments therein to enhance audit accountability and independence, Gupta said that ICAI is of the “ strong view” that accountability of any profession is crucial. But in the consultation paper, it was assumed that conflict of interest exists between the auditor and the management in most cases which is not backed by proper evidence, Gupta said. “It will be incorrect to paint the whole profession with the same brush,” he said.

Audit sector reform

Gupta made it clear that the ICAI strongly believes that it is not required to have a blanket separation of audit and consultation functions on the lines adopted by the UK’s Financial Reporting Council (FRC), which is the audit and accounting regulator.

For the Indian situation, Gupta said that ICAI has made detailed recommendation to the MCA-appointed committee on this front and three aspects are under consideration: not allowing auditors to offer nonaudit services; making joint audits mandatory for companies with certain threshold; and appointing auditors through an independent agency.

“These are proposals on the table. You will see concrete decisions on this in the next few months. What the UK has decided is they will go in for bifurcation of auditing and consulting functions to improve audit quality,” Gupta said.

The FRC had recently announced operational separation of audit practices (from the rest of the firm) to improve the quality and effectiveness of corporate reporting and audit in the UK, following the Kingman and Brydon reviews. This will now require the Big Four accounting firms to put their UK auditing and consulting practices in separate business units by 2024; but they may keep them within the same parent companies.