The Institute of Chartered Accountants of India is likely to issue guidelines for chartered accountants and firms that will make rotation of auditors mandatory.
The move comes in the wake of a series of corporate scandals involving auditors that rocked the United States last year.
The ICAI council, the apex policy-making body for Indian auditors, had taken up the issue last year. Though a majority of its members had supported it, a decision was deferred after some sections objected.
Subsequently, the auditing and assurance services board, the corporate laws committee and the financial markets and investors protection committee deliberated on it and came out in support of the move. The committees also gave the council a set of options to choose from.
The council, scheduled to meet in June, would first take a decision in principle and then frame the guidelines that would be applicable to the chartered accountants and firms, ICAI sources said.
The council will decide on issues like the periodicity of rotation -- three or five years -- and whether the same auditing firm can be reappointed, and if so, after how many years. It will also decide whether auditing firms related to an existing or past auditor can be appointed.
Some council members are also of the opinion that auditors should get a specified term of, say, three years instead of annual mandates. This, they feel, will give the firms a certain level of independence.
ICAI will also debate on the role of minority shareholders in changing auditors. One of the proposals before the council has specified 25 per cent support of minority shareholders for removal of an auditor.
However, the Naresh Chandra committee, which looked into the auditor-company relationship, was of the opinion that at present there was no need to legislate in favour of rotation of auditors.
It, however, said the partners of an auditing firm and at least 50 per cent of the team responsible for audit of listed companies should be rotated every five years.
It said the same should apply to companies with a paid-up capital and free reserves of above Rs 10 crore (Rs 100 million) or with a turnover of over Rs 50 crore (Rs 500 million). The exiting auditors could, however, return after three years.
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