Rotation of auditor issue won by one vote in ICAI

It was not easy for the hawks in the central council of the Institute of Chartered Accountants of India to clinch the decision on mandatory rotation of auditors in listed companies.

The results of a vote on the issue early this week reveal that those favouring auditor rotation won the day with a wafer-thin margin.

According to ICAI sources, there was a vertical split in the 29-member central council, which includes six government nominees.

There were three absentees, including G C Shrivastava, joint secretary in the revenue department.

Rajiv Mehrishi, joint secretary in the department of company affairs, did not cast his vote. A dozen members voted against rotation of auditors and lost by a single vote.

At least two past presidents of ICAI, as well as present president R Bupathy and vice-president Sunil Goyal, were against the proposal of mandatory auditor rotation, the sources said.

Three members from audit firms, domestic affiliates of the Big Four, also did not favour the motion, they added.

The sources said Bupathy and Goyal generally abstained from voting on proposals taken up by the central council, the apex decision-making body of ICAI. On this occasion, however, they had cast their votes.

The sources added that ICAI's last president, Ashok Chandak, was also against the concept of rotation of auditors.

"He has undertaken assignments with KPMG," a source said, indicating that Chandak supported the multinational audit firms' views on the issue.

When contacted in Nagpur, Chandak said: "Yes, I did take up a professional assignment with KPMG for vetting the tax laws of Haryana and Punjab. But you must remember that it was during my tenure as president of ICAI that the council rejected an application from KPMG for registration with the institute."

Chandak added that rotation of auditors was a sensitive issue and could affect the profession of accountancy.

"Moreover, the remuneration from KPMG does not even contribute 2-3 per cent of my gross earnings," he said. "There is no question of me being influenced by this."

ICAI has now decided to hold a referendum on the issue of auditor rotation among its 110,000 members.

It plans to post a questionnaire, either on its Web site or in the Chartered Accountant Journal, to seek the fraternity's views on rotation and the concept of joint auditors.