The CA Institute has made it mandatory for certain audit firms to self-assess their ‘audit quality maturity’ from April 1, 2023, its President Debashis Mitra has said.
What started as a voluntary initiative last year has now been turned into a mandatory exercise by the CA Institute, the world’s second largest accounting body, from this date next year.
It is reckoned that about 2,000 audit firms that are involved with the statutory audit of public interest entities in the country will go through a mandatory self-evaluation exercise and get their maturity levels ranked under the Audit Quality Maturity Model (AQMM) developed by ICAI’s Centre for audit quality. However, firms doing only branch audits are not covered for this exercise.
The maturity level of the firm arrived at, after being reviewed by the peer reviewer would be hosted on the website of the Institute of Chartered Accountants of India (ICAI) alongside the details of the peer review certificate, sources said.
To begin with, firms auditing a listed entity, banks other than co-operative banks (except multi-state co-operative banks) and insurance companies will be covered in the mandatory self- assessment exercise, Mitra told businessline.
It maybe recalled that the ICAI had last year rolled out AQMM v 1.0, but made it recommendatory initially.
India is the only country where a separate model for self-evaluation of audit quality maturity has been introduced, sources said.
“There are a set of questions under AQMM where the firm of chartered can self-evaluate itself on where exactly it stands on audit quality front,” Mitra said.
Audit quality maturity assessment is only for those engaged in audit of public interest entities. If you are maintaining quality, you will survive. If you don’t maintain quality the chances of your survival in the long run is not very bright. That’s what CA Institute wants to convey. When I say audit is a serious business, I totally mean it,” Mitra added.
A series of fraud events in Corporate India such as Nirav Modi scam in Punjab National Bank, the blowout of IL&FS, collapse of DHFL had shocked the nation and raised concerns over audit quality and the ability of statutory auditors to highlight corporate misconduct when they attest financial statements.
This has prompted the ICAI to focus attention on audit quality and introduce self evaluation matrix for the audit firms.