Government may offer foreign auditors direct access

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In a move that signals the government’s intent to allow foreign audit firms to register and operate directly in the Indian market, the Ministry of Corporate Affairs has written to the Institute of Chartered Accountants of India (ICAI) to seek its views and recommendations on the government proposal.

Currently, Indian laws don’t allow any multinational accounting firm to be registered in India as auditors. The thinking within the government is that as part of an ongoing reforms process, the services sector should also be liberalised and global auditing firms could be allowed to operate directly here to make the profession more competitive and robust.

The ministry has written to the institute on August 10, said ICAI president M Devaraja Reddy . The institute is set to discuss this proposal in a meeting to be held on August 24 and then respond to the the request, he added.

The government will have to amend the Chartered Accountants Act, 1949 that regulates the accounting profession in India to allow foreign firms to operate in India.

Currently, MNC professional services firms that offer auditing services in India, including the Big Four – EY, PwC, Deloitte and KPMG – audit Indian companies through a bunch of their network or affiliate firms.

Though for all internal purposes, the accounting practice in any of the Big Four is treated just as any other practice area like tax, transactions, or advisory , but on paper, the affiliate firms are run as separate partnerships.

If the Indian government does allow direct entry, more global firms are likely to invest big in their India network and also the market could see the entry of new players.

“Given the significant exposure of global investors in Indian firms, it’s natural to ask for an auditor who they are more comfortable with. More global players will mean more choice and better quality of services. It will also enhance the credibility of Indian markets,” says the CEO of a global firm.

For Indian audit firms, the move could spell further trouble, as they have been steadily losing the most lucrative audit assignments to the Big Four over the past two decades.The four global firms now dominate the book-keeping business in India. As it is, the mandatory audit rotation brought in by the Companies Act 2013, is set to kick off from April 1, 2017 and that will further see a movement of big accounts away from Indian firms towards the Big Four and other two prominent network firms, Grant Thornton and BDO.

In major markets, the global giants have a monopoly over the audit business – 99 per cent of companies in FTSE are audited by the Big Four firms, while 86 per cent of those listed on the NYSE work with these audit firms.

But in India, 62 per cent of the BSE 500 companies, including some of India Inc’s biggest firms, are still not audited by the Big Four.For example, Reliance has had Chaturvedi & Shah as auditors for decades, L&T books have been audited by Sharp & Tannan and Hindalco had stayed on with Singhi & Co for long time.In China, the Big Four lost domination to local firms after the government brought in regulations that were unfavourable for the global players. Indian accounting firms are also betting on government regulations that will keep their interests protected.

“The government will have to find a middle ground. It will have to create a regulatory framework that allows the global firms to invest and practice, also keeping in mind the concerns of the Indian accounting firms which service a large section of Indian companies, both big and small,” said the CEO of a leading Indian accounting firm.

Multipurpose Empanelment Form for the year 2016-17

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Multipurpose Empanelment Form of ICAI (MEF-ICAI), an online application, is meant for allotment of Bank / Branch Audits to the ICAI Members/ CA Firms, which can be filled and submitted at the MEFICAI website directly.

Online Multipurpose Empanelment Form (MEF) for the year 2016-17 is live at www.meficai.org. The last date for submission of online MEF Form for the year 2016-17 is 31st August, 2016 and for submission of hard copy of “DECLARATION FOR MEF 2016-17” is 12th September, 2016.

In case, an applicant faces any problem regarding MEF, complaint may be lodged by accessing complaint-box link available on www.meficai.org

 

In case, the complaint is not resolved or replied within a week, members can call at 011-30110444, 30110411, 30110440, 30110480, 30110438, 30110451 and 30110508 (between 3.00 PM to 5.00 PM on all working days).

 

With kind regards,

Prafulla Premsukh Chhajed

Chairman, Professional Development Committee

 

ADVISORY FOR FILLING MULTIPURPOSE EMPANELMENT FORM 2016-17

Now, listed companies’ management to explain audit qualifications : SEBI

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Markets regulator Sebi today asked listed companies to disseminate cumulative impact of audit qualifications in a separate format along with the annual audited financial results to the stock exchanges.

Besides, the management of a company would be required to explain its view about audit qualifications.

The new framework would ensure that the impact of audit qualifications are clearly communicated by the companies concerned to their investors in a timely manner apart from streamlining the whole process.

Sebi decided to have the new system on audit qualifications after extensive discussions with its advisory committees, Institute of Chartered Accountants of India (ICAI), stock exchanges and industry bodies.

Now, listed entities will be required to disclose the cumulative impact of all audit qualifications on relevant financial items in a separate form called ‘Statement on Impact of Audit Qualifications’ instead of the present form.

Such disclosures will have to be made in a tabular form, along with annual audited financial results filed in compliance with the listing regulations.

The new mechanism will be applicable for all the annual audited standalone/consolidated financial results, submitted by the listed entities for the period ended March 31, 2016 and thereafter.

The listed entity will have to furnish a declaration in case there are no audit qualifications.

In case of audit reports with modified opinion, a statement showing impact of audit qualifications will be filed with the stock exchanges in a format specified by the regulator, Sebi said in a circular today.

Issuing a format for ‘Statement on Impact of Audit Qualifications’ for the financial year, Sebi said that companies will have to disclose net profit, networth, turnover, total expenditure, earning per share, total assets and liabilities.

Besides, the firms will have to make submission about details, types, frequency of audit qualification. The management will have the right to give its views on the audit qualification.

Also, the management of the listed entity will have explain its views on the audit qualifications.

“Where the impact of the audit qualification is not quantified by the auditor, the management shall make an estimate. In case the management is unable to make an estimate, it shall provide reasons for the same. In both the scenarios, the auditor shall review and give the comments,” Sebi noted.

Source: http://www.business-standard.com/article/pti-stories/now-listed-cos-management-to-explain-audit-qualifications-116052700918_1.html

ICAI issues stricter guideline for CAs

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Putting in place a stricter compliance mechanism, chartered accountants apex body ICAI has barred members from participating in tenders for assignments that can be performed only by CAs. However, ICAI members can participate in such tenders if the minimum fee for the assignment has been prescribed by the entity concerned. The Institute of Chartered Accountants of India (ICAI) has said a practising member “shall not respond to any tender issued by an organisation or user of professional services in areas of services which are exclusively reserved for chartered accountants, such as audit and attestation services”. According to the institute, the restriction would not be applicable in instances where the minimum fee of the assignment is prescribed in the tender document itself. CAs would be free to participate in the tenders where “areas are open to other professionals along with the chartered accountants”, a recent ICAI notification said. Members can avail the multipurpose empanelment data available with it in cases where the assignments mentioned in the tender can be done only chartered accountants, the institute said in a separate communication posted on its website. Further, ICAI has cautioned that members who violate the guidelines with respect to participating in tendering process would be liable for disciplinary action.

PTI RAM SA

Source: http://indiatoday.intoday.in/story/icai-issues-stricter-guideline-for-cas/1/641877.html

Bank Branch Auditors’ Panel for the year 2015-16 – (11-01-2016)

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MEFICAI Bank Branch Auditors Panel 2015-16

The ICAI has announced Draft Bank Branch Auditors’ Panel for the year 2015-16 and the same is hosted at MEFICAI website(http://www.meficai.org). To view the category of firm, please click on the relevant range of MEFICAI Acknowledgement number:

The draft Bank Branch Auditor’s Panel 2015-16 will be available on MEFICAI website http://www.meficai.org.

Also, for any query / issue relating to MEFICAI Bank Branch Auditor’s empanelment for 2015-16, you may please contact with PDC Secretariat on 011-30110444, 30110438,30110440, 30110451, 30110480 and 30110508.

Regards,

CA. Anuj Goel

Chairman, Professional Development Committee

Source: http://www.meficai.org/CoveringLetterforHostingMEF2015-16.htm

Government to set up new agency to probe corporate accounting frauds

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The government will soon set up a specialised agency to investigate large corporate accounting frauds. It is keen to establish a robust mechanism for faster inquiries into scams such as the one at Satyam Computer Services, which overstated earnings for several years under a previous management.

The proposed agency is likely to examine accounting frauds of certain classes of listed companies or those of Rs 500 crore and more.

To be formed under the Companies Act provisions, the agency will be mandated to investigate auditing and accounting frauds, either suo motu or on referral by the Centre.

 

“The threshold for accounting frauds to be probed by the upcoming agency is likely to be Rs 500 crore and above. It could also probe frauds of certain classes of listed companies,” said a senior government official. “Currently, there’s a lack of specialisation required to probe complex accounting frauds. The agency will ensure swifter probes.”
First suggested in the aftermath of the Satyam fraud, in which the auditor was also implicated, the upcoming agency will have an overarching role to regulate chartered accountants as well as set standards. It will have forensic auditors on its panel as well.

At present, the Institute of Chartered Accountants of India (ICAI) has authority to investigate and take disciplinary action in cases in which an auditor is involved. Any fraud below the threshold set by the government could still be investigated by the professional association.

ICAI has requested the corporate affairs ministry to not dilute its authority. If the government is keen on setting up an authority, ICAI has suggested that this look at high-value accounting scams above a threshold of Rs 1,000 crore.
“We have made a representation to the government that ICAI’s mandate should not be diluted and authority to initiate probe and take disciplinary action against auditors should rest with the institute,” ICAI president Manoj Fadnis told ET.

In recent years, ICAI has probed auditors of companies such as Reebok, Sesa Goa, Satyam and the Saradha Group among others. These inquiries followed references sent by the Serious Fraud Investigation Office (SFIO).
“The agency will strengthen the government’s mechanism and will ensure faster enquires into accounting frauds. For the auditing profession as well, it will be a very positive step as the agency will oversee quality of profession,” said Lalit Kumar, partner at J Sagar Associates. “But the government also has to ensure that ICAI’s mandate is not diluted.”

A recent study by Assocham and Grant Thornton India said there was a 45 per cent increase in Indian corporate fraud in the past two years. The proposed agency will have powers to penalise audit firms in case they are found guilty of misconduct. Penalty could also include the disbarment of such audit firms.

The agency will also be solely in charge of setting up and revising accounting standards and will have professionals from industry and several government bodies on its panel. “The agency will make recommendations on formulation and laying down of accounting and auditing standards for companies,” a senior government official told ET. “It will also monitor and enforce compliance and oversee quality of service of professionals in the industry.”

ET VIEW

No Duplication Please, Overhaul SFIO

Duplication makes no sense. India already has a specialised agency, the Serious Fraud Investigation Office (SFIO) to do cutting-edge investigation on financial frauds. The Institute of Chartered Accounts of India, on its part, can take disciplinary action against errant auditors. True, the SFIO’s functioning has been dismal so far, and what is needed is to transform the agency to take on new and complex probes. It should hire professionals laterally including cyber security experts, forensic auditors and tap the best talent from other investigating agencies. Ideally, it should draw together a team depending on the case. But to attract the best talent, it also needs to pay market-linked salaries.

Source: http://economictimes.indiatimes.com/articleshow/49927368.cms