The Institute of Chartered Accountants of India will hold a referendum among its members to decide on the issue of allowing rotation of auditors of a company. Opinion is divided over the issue and hence a referendum is being looked at as a solution to the dispute.
This was revealed by ICAI's president R Bhupathy, who was in the city to attend a sub-regional conference of the institute. The institute is in the process of framing a questionnaire for this referendum.
"We may refer to instances where a similar situation arose. Although no specific date can be said as to when the questionnaire would be ready, it should take three to four months," said Bhupathy.
He said that those who support rotation of auditors contend that, once a particular firm is continuously appointed to carry out the audit of a company, there are chances of the CAs' integrity being compromised.
However, those who are against rotation say that, since such CAs get acquainted with the intricacies of a company's business, they can offer other value added services. In such a case continuity of an audit firm can be beneficial to the profession, informed Bhupathy.
Those not agreeing on rotation of auditors also say that it may lead to higher expenses every time a new auditor has to be appointed. They also say that so far no similar institute in any other country has gone for rotation of auditors. But those supporting the concept argue that India can be a pioneer in introducing this new rule.
About other developments in the ICAI, Bhupathy said a number of state governments had approached the institute for changing the accounts in their municipalities into double-entry system from the present single-entry system.
This follows the change made in the accounting system of the Municipal Corporation of Delhi with help from the institute. While in that case of the job was done by the accounting research foundation in the ICAI, for other states, members may be allowed to lend their expertise on a contractual basis, the ICAI president said.
The institute has also published papers which can serve as guides for auditing of specific types of business concerns. It has come out with papers on the travel industry and plans a similar exercise for the airlines' business, he said.
Bupathy also said that the ICAI would be coming out with an accounting standard on contingent assets and liabilities this week and another one on financial instruments would be introduced by end-November.
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