Rotation of audit partners compulsory from '09
25 Feb 2008, 0037 hrs IST,
Pankaj Doval
,
TNN
The step, cleared by ICAI, will be operational from April 2009 and is expected to significantly reduce complexity between individual partners in audit firms and their assigned companies, something that has been a cause behind many of the big corporate frauds to have hit the financial world.
"We have cleared rotation of partners and this would come into force from April 1, 2009 only for listed firms, ICAI president Ved Jain told TOI.
He said the move will bring in more transparency in the corporate sector and will help in increasing confidence in the auditing process.
India is taking the step as part of harmonization of auditing standards with the International Auditing and Assurance Standard Board (IAASB), the international audit standard-setting organization. So far, over 100 countries have moved to adapt global practices of IAASB. Even the Sarbanes-Oxely Act in the US mandates rotation of partners.
Rotation of partners on the assignment has been cleared as part of the Standard on Quality Control (SQC), said Jain.
Currently, there are around 1.45 lakh CAs in India, half of which are estimated to be in independent practice while the other half are employed in firms and companies. However, as many as 72 per cent of the independent professionals are estimated to be single practicing proprietary CAs.
Asked how would the single-proprieter firms work out the issue, director with ICAI Vijay Kapur said they would need to provide for a compulsory peer review. "We have provided this option as rotation here is not possible, he said.
The original idea of rotation of partners, for listed companies and for non-listed firms having substantial public interest, was first mooted by the ICAI in 2003, especially after a series of corporate frauds. However, the body referred it to a committee that was to work on it keeping in mind global practices, industrial perspective and logistical issues.
CAclubindia
