Finance minister Nirmala Sitharaman on Tuesday said a new law to regulate auditing standards in the country and bring them on a par with the best global practices would help engender “homegrown world-class institutions” akin to the ‘Big Four’.

Parliament passed the Chartered Accountants, the Cost and Work Accountants, and the Company Secretaries Amendment Bill, 2021, on Tuesday, with the Upper House clearing it by a voice vote. The Lok Sabha had cleared the bill on March 30.

The Bill is aimed at bringing greater robustness and accountability in India’s auditing standards as well the way audit certificates are given. It seeks to strengthen the accountability of chartered accountants by overhauling disciplinary mechanisms and increasing the fines for lapses. The trigger for the law is believed to be recurrent accounting scams.

Sitharaman, who is also the minister for corporate affairs, said since India has witnessed rapid changes in the way the economy is being profiled, the sanctity of the audited financial statement, which is where the role of CAs come into play. has got to be maintained and given its due position. “We need to have audit and certification quality. We also need to have a favourable investment climate being brought in,” she said, replying during a debate in the Rajya Sabha.

Citing the examples of Satyam and the IL&FS scandals, she said, “We have repeatedly been questioned about the number of failings of the CAs who did not deliver as per the expectations.”

A section of the auditors’ community had objected to many provisions in the Bill, alleging that these would undermine the autonomy of the respective institutes governing the professions of CAs, company secretaries and cost accountants.

Currently, the disciplinary committee for CAs has five members — three ICAI central council members and two government nominees. The Bill proposes to include two CAs and three non-CAs. Besides, it has been proposed that the disciplinary committee will be headed by a non-CA.

Institute of Chartered Accountants of India (ICAI) president Debashis Mitra had pitched for maintaining the “status quo” on the constitution of the institute’s disciplinary committee and asserted that the current system is working well.

Sitharaman, however, said: “This (Bill) is with the intention of making the three institutions a lot more transparent in their disciplinary matters, and raise the quality of the disciplinary processes.” The minister said the functioning of the three audit/accounting institutes — ICAI, ICSI and ICWAI — would continue to be governed by the respective three Acts. These bodies would also continue to have the authority for qualifying and licensing of people and regulation of their conduct as was done before, she said.

Among other things, the Bill provides for the setting up of a coordination committee headed by the secretary of the ministry of corporate affairs. It will have representations from the three institutes. The Bill also provides for registration of firms with the institutes as it will help in paving the way for Indian accountancy firms to grow big.

The Congress, TMC, DMK, CPI (M) and YSRCP opposed the bill, citing “infirmities” and alleging that it was a blatant attack on professional autonomy.

(with PTI inputs)