The auditing fraternity is clearly facing the regulatory heat going by the recent rules notified under the new company law.
Besides mandatory auditor rotation and requirement on reporting of frauds to the central government, the chartered accountants’ fraternity has to grapple with a rule that has capped the number of audits by a member to 20.
There is also a turf war brewing between the chartered accountants and other sister professions what with the Finance Ministry proposing to allow company secretaries and cost accountants to undertake tax audit work.
Tax audits and representation before income tax authorities have so far been only the preserve of chartered accountants.
But the recently announced draft direct taxes code Bill proposes to include company secretaries and cost accountants within the definition of ‘accountant’.
If this were to go through, then a company secretary or a cost accountant too will be able to offer tax audit services.
SPECIAL COUNCIL MEETING
Pushed to a corner on the aspect of capping on audits, the CA Institute has convened a special council meeting on April 21 to debate this issue and other matters arising from the new rules.
Capping the number of audits at 20 will hurt the interest of small and medium practitioners, who form a significant chunk of the total practicing members’ fraternity, K Raghu, President of the Institute of Chartered Accountants of India told Business Line here.
“We were hoping that private companies and one-person companies would be excluded from the audit cap number when the final rules are notified. But that has not happened.
The number 20 would cover all categories of companies and that would not be good news for small practitioners”, he said.
Of the total member strength of 2.4 lakhs, the number of active practicing chartered accountants stood at about 70,000-80,000, Raghu added.
The special council meeting will also discuss the proposed changes in tax audits and the implications for the profession.
“Just as we are not keen to enter the domain of other professions to take up cost or secretarial audit, we do not want others to enter our domain area of financial and tax audits”, Raghu said adding that CA Institute will take up this issue with the Finance Ministry.
The main question is whether cost accountants and company secretaries have the domain expertise to handle income tax matters.