ICAI President bats for coordinated disciplinary action against audit firms

The Institute of Chartered Accountants of India (ICAI) is all for a coordinated approach in action against audit firms, said its President Nihar Jambusaria. He said different regulators, overseeing audit profession, should not take multiple actions, stressing that action should be taken at one place.


“…so far as civil action is concerned, there should be action only at one place, not at every place. If SEBI

finds something is wrong, SEBI should ask the Institute to initiate disciplinary proceedings against the member. Or if the RBI finds out something wrong, they should inform the Institute. Multiple agencies should not take action…We would like to have a coordinated approach,” Jambusaria told ETCFO.

For criminal offenses, the ICAI does not have the power to take action against auditors; the Institute can act only against professional misconduct or financial audit lapse, he added.

Auditors are currently regulated by multiple regulators, with each having its own jurisdiction. National Financial Reporting Authority (NFRA) regulates auditors of large listed and unlisted firms. Markets watchdog, Securities and Exchange Board of India (SEBI) regulates auditors of public listed entities. The Reserve Bank (RBI) regulates auditors of the financial services sector. The Ministry of Corporate Affairs (MCA) regulates auditors of an entire set of companies. The Institute of Chartered Accountants (ICAI) regulates its CA members.

The ICAI President shared his views on the CA Amendment Bill, 2021, that gives powers to the CA Institute to act against whole audit firms and not members alone.

“…Now if the firm is guilty, the disciplinary committee will be able to take action against the firm…But it does not mean that every time a member is guilty, then automatically the firm is guilty,” Nihar Jambusaria told ETCFO in an interview.

If and when the new regulation comes into place, the Institute will reassess its current set of complaints against members and examine if an action is required to be taken against the whole audit firm, he said.

‘Presiding officer should be CA’

The ICAI President had one reservation on the CA Amendment bill; this was in respect of the constitution of a disciplinary committee.

As per the existing CA Act, the disciplinary committee of ICAI has two government nominees and three Council members. However, the CA Amendment Bill 2021 proposes to include two chartered accountants and three non CAs. It further proposes to have a non-CA member as presiding officer. All these five names are to be recommended by the CA Institute and approved by the corporate affairs ministry.

“…you may refer people of eminence (non-CAs) but at same they may not have thorough knowledge of accounting, audition standards, and ethical standards. Take an example If I am a CA, and I am presiding officer of doctor’s disciplinary and trying to deal with a case where there is a surgery and there are complaints, what will I understand?,” Jambusaria asked.

“If non-CA members would participate and they would be explained by CA, but as a presiding officer to decide and give judgment, it would require a thorough understanding of the law, and for which even CA has to be in practice for 10-15 years,” the ICAI President said.

The Institute has written to the corporate affairs ministry, requesting it to reconsider this decision, he said. The Bill was introduced in the winter session of the Parliament but now referred back to the standing committee.

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