The Institute of Chartered Accountants of India (ICAI) has proposed to allow CAs to take statutory audit work for 40 firms – companies, limited liability partnerships (LLPs), partnership firms, etc – up from 30 now, besides giving them a host of other relaxations including letting them hold non-educational seminars in India and abroad, and advertise to attract clients.
The draft Code of Ethics released by the institute recently also allows auditors to take on more non-audit work, especially in the MSME space.
The ICAI, however, said that the CAs will still have to comply with the statutory ceiling of audit limit prescribed under the Companies Act, 2013. As per Section 141(3)(g) of the Companies Act, an individual auditor or a partner in a firm is not allowed to do audit work for more than 20 companies at the same time (excluding one-person companies, dormant companies, and small companies with paid-up share capital below Rs 100 crore).
The current guidelines allows CAs to sponsor only international “educational seminars/events” organised by ICAI. However, the ICAI in the new draft has proposed to allow CAs to sponsor select events at both international and domestic forums, under ICAI’s directions. Moreover, these events could go beyond “educational seminars” to events with national and regional significance.
The changes proposed by the ICAI will likely lead to the creation of large CA firms and provide domestic CA firms a platform to compete with global audit and advisory firms, analysts feel.
As per the existing advertisement guidelines, CAs or firms are permitted to provide only those particulars of their firm in the form of a write-up that must strictly adhere to the prescribed font requirements, including a maximum font size of 14 points. While retaining the restrictions on advertisements, such as no exaggerated claims or making any disparaging references, the proposed guidelines have provided flexibility to members and firms by allowing the inclusion of additional information and revised meaning of “write-up” in contemporary manners.
Further, the ICAI has proposed to repeal separate guidelines governing the mention of member names and firm names in directories (telephone or other directories).
In a move that would bring more work to CAs, the ICAI has decided to allow CAs to take on audit assignment for companies undergoing insolvency resolution process. For instance, the existing guidelines prohibits incoming auditor from accepting an audit assignment if any undisputed audit fees to the previous auditor remain unpaid, except in case of a sick unit. The proposed revision introduces an additional exception to this restriction. It clarifies that the prohibition will not apply in situations where a company is under the insolvency resolution process and a resolution professional (RP) has been appointed as per the Insolvency and Bankruptcy Code, 2016.
Under the current guidelines, a member is prohibited from accepting statutory audit of a listed company or PSU or government company or any other public company with an annual turnover of over Rs 50 crore where the CA accepts any non-audit work of the same company on a remuneration which exceeds the fee payable for carrying out the statutory audit of the same company. This threshold has been revised to Rs 250 crore which would result in more non-audit work for CAs.
