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Audit regulator NFRA has decided to hire consultants to assist it in identifying audit reports that need to be taken up for review.
Consultants — mainly chartered accountants — are proposed to be hired for a period of one year (on a contract basis) to assist the National Financial Reporting Authority (NFRA) in the conduct of audit quality review and disciplinary proceedings.
It may be recalled that the NFRA is a statutory body set up under the Companies Act. It is now an independent regulator for auditors of listed companies and large unlisted companies, besides banks and insurers. It was constituted by the Centre to enforce auditing standards. The Authority also has oversight of electricity firms and corporations referred to it by the Centre. Now, consultants, including senior ones, are proposed to be appointed across several grades.
Calling the move a step in the right direction, Amarjit Chopra, past president of the Institute of Chartered Accountants of India (ICAI), said having permanent people within the Authority may create problems when it comes to weeding out issues in the future.
Minimum experience
At the same time, Chopra said, in the case of junior consultants, there is a need for a minimum experience of 10 years, against the current proposal of five years. He also felt that the age limit for junior consultants should not be capped at 35 years. Rather, only those between 35-45 years should be picked to review audit reports.
Also, consultants should have no role in the identification of audit reports for review, Chopra said. “No consultant should be involved in any form of exercise for identification. There should be an independent mechanism within NFRA to see which of the audit reports should be taken up,” he added.
Ashok Haldia, former Secretary of the ICAI, said the regulator for any profession should ideally depend on internal institutional capacity and capabilities. The objective should be to strengthen internal capacities even while utilising external support, which may be needed in specific areas such as technology and forensics, or for non-critical tasks.
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