New Companies Bill likely to see stronger auditing regulations

New Companies Bill likely to see stronger auditing regulations
The Financial Express, February 10, 2009, Page 2

Neha Pal

In the wake of the Satyam accounting fraud, the ministry of corporate affairs has woken up to the need of stronger auditing standards and feels that the new Companies Bill would provide a stronger regulatory platform since the Centre would notify the same as part of the bill. Currently, there is no provision for auditing standards and it is up to the Institute of Chartered Accountants of India (ICAI) to decide on the implementation of both the accounting and auditing standards.

Jitesh Khosla, joint secretary, ministry of corporate affairs told FE , “As per the new Companies Bill, 2008, there is a provision that the auditing standards will be prepared by the Centre.

This would be quite relevant considering the fact that the Satyam fraud has raised questions about auditing standards and the role of auditors”.

Ved Jain, former president, ICAI said, “I don’t think the government needs to form a separate regulatory body to avoid cases like Satyam, since the Satyam episode is nothing but an accident. After the Enron episode in the US , the Public Company Accounting Oversight Board was formed and the Sarbanes Oxley Act was also introduced and Satyam was covered by both”.

The new Companies Bill, currently before the Parliamentary standing committee on finance, specifically provides for a clause, which states, “The Centre may, after consultation with the National Advisory Committee on Accounting and Auditing Standards, by notification, lay down auditing standards. Provided that until any auditing standards are notified, any standard or standards of auditing specified by the Institute of Chartered Accountants of India shall be deemed to be the auditing standards. The Centre may, after consultation with the advisory committee, by general or special order, direct, in respect of such class or description of companies, as may be specified in the order, that the auditors’ report shall also include a statement on such matters as may be specified therein”.