ICAI seeks more powers

The Institute of Chartered Accountants of India has suggested to the government that the new Companies Act should provide that the resigning auditor be allowed to attend the general meeting in which the new auditor was appointed.

It was necessary to let the shareholders in the general meeting know the real reasons for the resignation of the auditor, the ICAI said in its response to the ministry of company affairs.

Further, to enhance the independence of the auditors, it has been suggested that a special resolution should be required for removal of the auditor.

The ICAI has pointed out that the Companies (Amendment) Bill, 2003 contained a provision to this effect. It has suggested that the existing Section 225, which provides for the special resolution, should be strengthened.

On the question of auditor remuneration, the concept paper had included reimbursement of expenses as part of the remuneration. The ICAI has opposed this move and asked for reimbursements to be excluded.

Justifying its demand, the ICAI said the auditor remuneration served as a self-regulatory measure prohibiting the auditor to receive more than 40 per cent of the fee from a single client.

Along with the ICAI, the Institute of Companies Secretaries of India has also suggested measures to strengthen the audit function. It has submitted to the government that apart from the audit report, a compliance audit report should be introduced on legal compliance.

The audit report deals with the compliance of accounting and financial statements. This requirement is proposed for listed public companies and companies having a turnover of Rs 25 crore (Rs 250 million) and above, where public interest is involved.

The ICSI has also pointed out that the signing and authentication of annual accounts by specified persons should be included in the Act itself, and not relegated to the rules.

The ICSI has suggested that companies secretaries should be empowered to carry out special audits, on par with the chartered accountants and cost accountants, as was provided in the Companies (Amendment) Bill, 2003.