Requirement of Audit Partner rotation – ICAI issues clarification

CaseWare IndiaAuditing

The big four audit firms holds the cream of the large company audits and related services in India as of now. With sophisticated infrastructure and economies of scale of its operations, it becomes easy for them to attract and retain large listed companies. The medium tier firms support mid-sized entrepreneurs and growing businesses including start ups.

With the introduction of the Companies Act 2013, the mandate of audit firm rotation came into picture. This has disrupted, the seemingly, stabilized audit profession, which means the audit houses have to improvise their strategies and innovate.

As reported by Economic times “leading companies, including some from the Tata Group and the Mahindra Group, are in the process of hiring new auditors as the audit rotation process gains momentum. Recently, Aditya Birla Group has made auditor changes in UltraTech and Aditya Birla Retail. According to a study by PRIME Database, audit related changes were made in 152 listed companies (out of 1,520 NSE-listed companies) from FY16 to FY17.”

Paragraph 27 of SQC 1, “Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements” issued by ICAI has already specified on audit partner rotation as applicable from April 1,2016. In the meanwhile, the Companies (Removal of Difficulties) Third order, 2016 has extended the time for compliance on audit firm rotation till the date of the first annual general meeting of the company held after 31st March 2017.

The Council of the Institute of Chartered Accountants of India (ICAI), at its 359th meeting held on September 16-17, 2016 considered this matter and issued a clarification in this regard.

To read more about the clarification and the decision of the council please click here.