No need to further curb ’nonaudit’ services of auditors: Industry bodies tell govt
NEW DELHI: Opposing any further curbs on 'complementary' non-audit services provided by auditors to companies, several industry bodies have told the government that the existing framework in this regard is adequate and benchmarked with the best global practices.
They have said there are sufficient safeguards in place with regard to the currently permissible non-audit services provided by auditors to their clients and any further restrictions or any addition to the restricted list would increase the cost of services without any corresponding benefit for the audit quality or independence.
The industry bodies have made their submissions in response to a consultation paper floated by the Ministry of Corporate Affairs (MCA), which has proposed significant amendments to existing regulations to enhance independence and accountability of auditors. This comes in the backdrop of several auditors and auditing entities coming under the regulatory lens for alleged misdoings.
While the Companies Act restricts auditors from providing certain specified non-audit services directly or indirectly to the company being audited as also for its holding and subsidiary entities, the MCA has now asked what more nonaudit services can be included in the list.
This blacklist presently includes accounting and book keeping services; internal audit; design and implementation of any financial information system; actuarial services; investment advisory services; investment banking services; rendering of outsourced financial services; management services; and any other kind of services "as may be prescribed".
In the consultation paper, MCA had noted that some audit firms were following selfregulation and had taken decisions to not take up non-attest work such as consulting and transaction advisory services from listed companies being audited by them.
Calling it "a welcome move" in the midst of auditors facing heat in some high-profile corporate scams, MCA said it has been suggested that more non-audit services could be added to the restricted list as there have been several media reports that the auditors have failed to report material issues with respect to auditee companies and in order to avoid conflict of interest and maintain the independence of the statutory auditors.
The deadline for submission of comments on the consultation paper ended on March 15.
In its submission, the Confederation of Indian Industry (CII) has said the current framework on non-audit services is adequate and is benchmarked with global best practices and therefore it does not recommend adding further restrictions or prohibiting additional services.
For permissible non-audit services, the Companies Act already prescribes obtaining approval from audit committee of a company's board.