Auditor’s long tenure may hit integrity, says study
A study by the Institutional Investor Advisory Services India Limited (IIAS) said as much as 25 per cent 286 top listed companies (Sensex, Nifty, BSE200, CNX200, Nifty mid-cap and all F&O stocks) have retained the same auditor for more than ten years.
“We find that some companies tend to stick with their auditor for excessively prolonged periods of time, which puts a question mark on the independence of the auditor and their ability to provide a balanced judgement on the accounts,” IIAS said.
In India, till now both the Companies Act and the Listing Agreement have been silent on the issue of auditor rotation. The only existing provision to this effect is found in the voluntary code issued by the ministry of corporate affairs (MCA) which prescribes an auditor rotation every five years. “Since these guidelines are non-binding in nature, most private sector companies disregard them,” IIAS said.
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