Panel suggests review of rules guiding action against auditors

THE PANEL SUGGESTED THAT PENALTY FOR 46 COMPANY LAW BREACHES SHOULD BE TONED DOWN

NEW DELHI: A government panel that examined ways of improving the ease of doing business in the country has recommended that there is a case for reviewing the rules on disqualifying directors and debarring auditors.

The panel led by Injeti Srinivas, secretary in the corporate affairs ministry, which presented its report to corporate affairs and finance minister Nirmala Sitharaman on Monday, also suggested that penalty for 46 company law breaches should be toned down. It also recommended that penalties could be reduced for startups, small, one person and producer companies, said an official statement from the ministry. Parity on remuneration of executive and non-executive directors is also recommended.

The committee said that nonexecutive directors, including independent directors, devote their valuable time and give critical advice to the company, they should be compensated suitably even in case of inadequacy of profits or losses as is allowed in the case of executive directors.

The panel said that accounting rule maker the Institute of Chartered Accountants of India (ICAI) should ideally be the body to decide on issues of debarment and right to practice by professionals. The right to practice is in effect the right to livelihood and hence, serious punishments like debarment should be considered only in rare circumstances, the panel said. In the case of audit firms, debarment should be an exception rather than a rule.

“It should only take place in cases where the firm refuses to co-operate in the proceedings in question or if the higher management of the firm is involved in the fraud,” the panel said. In other cases, debarment may be limited only to those individuals or partners involved in the fraud.