Panel to Monitor ICAI’s Auditing Norms
Auditing norms set by the Institute of Chartered Accountants of India (ICAI) are likely to be vetted by a panel consisting of various regulators, as the government learns its lessons from the Satyam scam and makes auditing norms legal and compulsory like accounting standards. The National Advisory Committee on Accounting Standards (Nacas), has representations from the RBI, SEBI and Comptroller & Auditor General of India, in addition to the three qualified institutes of accounting, company secretaries and cost accounting.
It will now watch over the auditing norms prepared by ICAI and suggest changes wherever necessary, according to a government official. Nacas was established in 2001 and functions under the ministry of corporate affairs. Constitutional appreciation of auditing norms is already on the agenda of the planned Companies Bill, 2009. Once auditing norms are given statutory recognition, breaking them could lead to legal action.
Auditing standards are self-governing of accounting standards and are currently used as a best practices directive to be followed. While originality with accounting standards makes a company responsible for regulatory action in accordance with the Companies Act, non-adherence with auditing standards does not involve regulatory action.
Auditors are required to go after the ICAI norms while performing an audit, and non-compliance can lead to action being taken at the level of the institute. In contrast, accounting standards, which guide the preparation and maintenance of financial books of companies, are constitutional in nature and non-compliance could lead to legal action.
The need for auditing standards was mainly felt after the Satyam crisis highlighted the need for regulatory control on the functioning of auditors. The Companies Bill, 2009, proposes to make auditing standards a part of the law, so that any auditor found violating them can be acted against as per the requirements of law.
Written by admin on October 11th, 2009 with 1 comment.
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