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ICAI to impose ceiling on overall audit assignments

K.R. Srivats

NEW DELHI, March 23

THE council of Institute of Chartered Accountants of India's (ICAI) has decided to place an overall ceiling on the number of companies in which a practising chartered accountant can function as an auditor in a financial year.

``The overall ceiling has been pegged at 30 companies. This implies that a practising member of the institute cannot take up audit assignments in more than 30 companies in any financial year starting from April 1, 2001,'' Mr N.D. Gupta, President, ICAI, told Business Line here.

He also said that the overall ceiling comes with a stipulation that the limit of 20 public companies as currently prescribed under the Companies Act, 1956 would have to be adhered to within the overall limit of 30 companies.

The Companies (Amendment) Act 2000 had removed the applicability of any ceiling in respect of audit of private companies. It had stipulated that Section 224 (1B) would not be applicable to a `private company'. This implied that the existing ceiling on th e number of companies in which a person or a firm can function as an auditor would not cover private companies.

In effect, the Companies Act now allows each practicing member to be an auditor for a maximum number of 20 public companies and also for as many private companies as the member may wish to undertake assignments.

Mr Gupta said that the council had now taken a decision to impose an overall ceiling without making any distinction between public and private companies. At the same time, it has also decided to stipulate that a practising member would have to adhere to the limit placed by the Companies Act as regards an appointment of auditor for public companies.

Mr Gupta said that the Chartered Accountants Act, 1949 empowered the council to take such decisions for effectively executing the statutory duties prescribed under the Act governing the Chartered Accountancy profession.

``We are empowered to bring in such a type of restriction. The council had earlier exercised its discretion in 1989 to introduce a similar ceiling for tax audit under Section 44 (AB) of the Income Tax Act,'' he said.

He said that ICAI would not want its members to compromise on their ``quality of work and independence'' by taking more responsibility in terms of the number of assignments. ``This was one of the reasons which prompted us to take such a decision.''

Further, the institute had also decided to issue mandatory photo-identification (ID) cards for its members in practice. ``We have come across a lot of instances where people who are not members of the institute have begun to take up audit as well as tax consultancy work by falsely claiming to be members,'' he said.

Mr Gupta said a photo-ID card with a hologram of the institute would help clients, tax administrators and general public in establishing the genuine identity of the members. ``We feel that the misuse of the statutory powers enjoyed by the members of the institute can be stopped through photo-ID cards.''

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