Financial Daily from THE HINDU group of publications
Thursday, Aug 26, 2004

News
Features
Stocks
Cross Currency
Shipping
Archives
Google

Group Sites

Home Page - Auditing
Corporate - Company Law


CAs worried over possible ban on non-audit services

Richa Mishra
K.R. Srivats

New Delhi , Aug. 25

THE controversial issue of non-audit fees that an auditor can receive from a client for whom statutory audit work has been performed has resurfaced.

The concept paper on the new Company Law now seeks to prohibit auditors from offering certain non-audit services, which would be mentioned by the Government from time-to-time. Even as the regulatory intent of the Government is to ensure independence of auditors, the proposed provision in the concept paper is giving jitters to the auditing community.

Their fear is that this provision in the concept paper, if enacted in the current form, may lead to a complete ban on providing of non-audit services to a client to whom a member of the Institute of Chartered Accountants of India (ICAI) is performing statutory audit work.

"To ensure independence of auditors, the Government can tomorrow say that an auditor cannot even earn Re 1 from any non-audit service to the same client for whom he is the statutory auditor. This is the worry as currently the institute permits members to offer certain non-audit service like management consultancy so long as the fees are within a cap," a senior ICAI official said.

The official pointed out that the steps proposed by the concept paper are in line with the thinking in the West, where after the recent corporate failures the statutory auditors have been completely barred from providing management consultancy services.

As regard ICAI, the institute had in March 2002 stipulated that a member cannot accept any non-audit work on a remuneration exceeding the prescribed audit fee for an undertaking in which the member has been appointed as a statutory auditor.

It had held that the cap on non-audit services would be applicable only in respect of undertakings that are a PSU/Government company/listed company and other public companies having a turnover of more than Rs 50 crore in a year.

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 to comment on the proposed regulatory regime for non-audit services, a senior ICAI official said that the auditing community would not prefer a "blanket ban" on non-audit services under the garb of ensuring independence of statutory auditors.

More Stories on : Auditing | Company Law | Corporate Governance

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page



Stories in this Section
CAs worried over possible ban on non-audit services


Lodhas raise questions over Birlas' joint stand
`Mahatma was witness to Birla clan partition'
India ranks 8th among Top 15 debtors
IOC board okays proposal to bid for Indonesian gas firm
Sterlite to set up steel plant in Orissa
Big chunk of fuel costs flows into Govt kitty
TCS shares close at 16% premium on debut
Fixed price project income pie shrinks for software cos
Truckers' strike fallout — Auto cos face supply, production problems
Wi-Fi services to be de-licensed — States to decide on waiving entertainment tax on broadband



The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | Sportstar | Frontline | The Hindu eBooks | The Hindu Images | Home |

Copyright 2004, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line