In the wake of a recent spate of resignation by auditors, the government is planning a review of auditing standards, a senior government official has said.
Auditing standards are framed by the Institute of Chartered Accountants of India (ICAI), which functions under the administrative control of the ministry of corporate affairs. The ministry will also likely to soon ask the ICAI to look into the issue and also suggest ways to deal with the issue.
“We will review it (norms) and this should not become an excuse for an exit of an auditor. The audit standards are too generalised. We find that audit standards very specifically permit them to resign in the event of non-cooperation. That also has to be relooked into,” the official said.
The MCA will be able to tighten the rules for the auditors with the proposed changes in the standards. Auditors are required to comply with the auditing standards under Section 143(10) of the Companies Act, 2013. Auditors in over 200 companies have resigned so far since the start of the year. In the Mumbai region alone, the number is around 60.
The ministry of corporate affairs had sent queries to the auditors under Section 143 (12) of the Companies Act, 2013, on these resignations, the official said.
“Some of them (auditors) replied that the companies were not willing to share relevant information,” another official said, adding that ideally, if the auditor has any doubts that fraud might have been committed by the company or its employees, they should report the matter immediately to the Centre.
For the companies, the ministry will take stern action against them in case of any financial frauds. This could include arrests of directors of the company, approaching the National Company Law Tribunal to take over the company or even appointing government-nominated directors in the company, the official said.
Source : PTI