The government has put forward a bill in the parliament during the ongoing winter session with a key objective to curb misconduct in audit and accounting industry.
The economic and corporate environment of the country is becoming complex and turbulent day by day, the Finance Minister Nirmala Sitharaman is quoted as saying in the statement "Further, recent corporate events have put the profession of chartered accountancy under a considerable scrutiny.”
Following are some events in the past few years that brought auditing profession into the scanner-
- The Reserve Bank of India banned S R Batliboi & Co from conducting audit of banks for 2 years as they failed to report non-performing asset of the private lender, Yes Bank Ltd. as per the directives of RBI
- Record number of auditors resigned from listed companies which included Dewan Housing Finance Corporation Ltd. (Deloitte), IL&FS (BSR and Associates LLP) and Infibeam Avenues Ltd. (SRBC & Co LLP)
- Two statutory auditors and a concurrent auditor of Punjab & Maharashtra Cooperative Bank were arrested by Mumbai Police as they failed to raise red flags over suspicious entries in the bank’s books of accounts.
The key changes that the Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Bill, 2021 proposes are as follows-
Autonomy to the Councils of the Institutes
Any changes in the fees to be charged from member, students and firms requires the government’s assent. The bill will equip the Councils of the respective institutes with the autonomy to fix fees and other charges for its members, students and firms.
Also, the term of the council is proposed to four years which is currently three years. However, the elected members can be the part of council for two consecutive terms of four years as compared to three consecutive terms of three years.
Appointment of Auditor of the Institutes
Currently, the three institutes are not required to select an auditor from the panel of auditors maintained by the Comptroller and Auditor General of India (CAG)
In order to boost accountability and transparency, the bill proposes that accounts of the institutes will be audited by a firm of chartered accountants selected from the panel of auditors maintained by the Comptroller and Auditor General of India.
Penalty for contravention increase
In case of grave offences which are listed under the second schedule of the CA Act, 1949 the penalty has been increased from Rs 5 lakh to Rs 10 lakh.
Also, the board of discipline will be required to conclude its inquiry within 90 days from the date of receiving preliminary examination report.
Registration of Firms with the Institute
Currently, the respective institute only register members. The proposed amendment will allow the respective institute to register firms as well.
The move will give institutes the power to take disciplinary actions against firms as well against their members.
Composition of Disciplinary Committee
The amendment proposes to include two chartered accountants and three non-CAs in the disciplinary committee.
Currently, the disciplinary committee requires two government nominees and three council members of the institute.
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