ICAI audit norms to get legal status

To bring in a more transparent and credible auditing system in the country, the government proposes to give explicit legal status to the audit standards prepared by the Institute of Chartered Accountants of India (ICAI), minister of corporate affairs Prem Chand Gupta said here on Saturday. The minister said that the Companies Bill, 2008, now being examined by a Parliament committee, aims to make auditing standards statutory. It will make audit firms that do not follow these standards, punishable under the company law. Now, guilty audit firms can only be disciplined under ICAI’s code ethics, which has less legal sanctity than the law. ICAI has a comprehensive list of auditing standards, but they lack a regulatory teeth. Under the present norms, breaching these standards can only lead to a disciplinary action against the guilty auditor. The Companies Bill 2008 proposes to make bring them at par with accounting standards which are already notified by the government. The idea behind giving a statutory status to auditing standards is to make chartered accountants, who sign the financial statements of companies, accountable under the law and to provide a strong deterrence against violations. Once the auditing standards are notified by the government, an auditor found guilty of breaching them can be prosecuted under the company law. The need for government-notified auditing standards has emerged like never before in the backdrop of the Satyam fiasco, where the company’s statutory auditor Price Waterhouse failed to do their audit duties properly leading to a Rs 7,000-crore scandal. – www.economictimes.indiatimes.com