Internal auditor cannot be tax auditor for the same company

Internal auditor cannot be tax auditor for the same company
The Hindu Business Line, March 11, 2009, Page 9

K.R. Srivats, New Delhi

Come April 1, an internal auditor of an organisation cannot take up tax audit of the same entity.

The auditing profession regulator — the Institute of Chartered Accountants of India (ICAI) – has now decided to implement this norm in true spirit from this date.

This decision will mainly impact those chartered accountancy firms that were being appointed as internal auditors and also performing tax audits for the same organisation. It also covers those employees who had taken up the role of an internal auditor.

The stipulation that an internal auditor cannot be a tax auditor has been put in place to ensure there is quality of service and auditor independence is maintained, said Mr Uttam Prakash Aggarwal, ICAI President.

“If the same person is getting two assignments from the same management — as an internal auditor as well as tax auditor, the chances are high that this will influence his independence. We do not want this to happen,” Mr Aggarwal told Business Line.

Although the central council had in October 2008 taken a decision to this effect, it was not fully put into practice on account of the representations received on this front. It was submitted that this decision would create “hardship” for those who had already appointed their internal auditor for carrying out tax audit for financial year 2008-09, i.e. assessment year 2009-10.