ICAI to put cap on audit fees
By Our Special Correspondent
The Institute of Chartered Accountants of India (ICAI) has decided to put a cap on the fees which an audit firm can accept for rendering any service, other than the audit fee, as a measure of ensuring the independence of auditors.
Starting April 1, the statutory auditors of public sector enterprises and other public companies with an annual turnover of more than Rs.50 crores, should not accept a remuneration (for any assignment or service rendered for the same company) exceeding the audit fee, said the newly-elected ICAI President, Ashok Chandak.
Talking to mediapersons on here today, Mr. Chandok and the institute Vice President, R. Bupathy, said auditors had to remain independent, if they were to monitor and report truly on how a company was governed. The unfolding developments in the U.S. in the Enron debacle gave rise to fears that the statutory auditors might not have been truly independent while reporting the corporate health, because the auditors might be rendering other services.
The ICAI's new restriction should apply in respect of fees for other services/assignments payable to statutory auditors and their associate concern(s) together. The term "other work'' or "services or assignments'' would not include audit under any other Statute like the Income-tax Act, certification work required to be done by the auditors and representation before authorities such as the Board for Industrial and Financial Reconstruction and debt recovery tribunals.
As a part of the ICAI's mandate to improve corporate governance, Mr. Chandok said the institute had recommended to the Union Government, an amendment to the Companies Act by which the Registrar of Companies could reject the accounts presented by a company, if the audit report contained certain "qualifications.
The concept of `peer review' (of quality of audit work of a chartered accountant firm by another firm) was to be implemented by the institute from April 1, 2003 (for auditors of PSEs, listed companies with turnover of above Rs. 10 crores). The ICAI council would soon release the detailed procedures of peer review.
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