INDIA BUSINESS WORLD - APRIL - MAY 2007
The Month that was ...

AUDITORS OF LISTED COS TO FACE TOUGH REVIEW

LISTED companies, which have been engaging just any chartered accountant (CA) firm for statutory audits, will now have to employ auditors of better standing. Based on a request from market regulator Sebi, the Institute of Chartered Accountants of India (ICAI) has made it mandatory for all CA firms engaged in statutory audit of listed companies to undergo a rigorous peer review.

Peer review by professionals appointed by ICAI is a quality certification similar to ISO certification. As per the ICAI governing council's decision earlier this month, those who do not get a certificate by the institute's peer review board will not be qualified for statutory audit of listed companies. The institute empanels CAs with at least 15 years' experience for the exercise.

"There are about 3,000 CA firms doing statutory audit of public limited listed companies. Of this, about 800 are already subjected to peer review. Now that it is mandatory, we will cover the rest within a year," ICAI president Sunil Talati said.

Accounting experts confirmed that some big listed companies with multiple subsidiaries engage CA firms that do not have internal controls to get compliance certification. This is compliance for the sake of compliance without following the spirit of the law, they said.

"Mandatory peer review would certainly improve the quality of audit work and it is absolutely essential in the case of big listed companies," said Dolphy D'souza, partner, Ernst & Young.