The Centre has moved to set up a new agency to regulate and discipline auditors, almost five years after the Companies Act provided for it, and, of course, after the PNB scam.
According to a Times of India report, the Union cabinet on Wednesday will discuss the setting up of the National Financial Reporting Authority, provided for in the Companies Act. It is expected to take away review and disciplinary functions of the Institute of Chartered Accountants of India (ICAI).
This move has also come after the Supreme Court last Friday took a serious note of unchecked auditing bodies adversely affecting the country’s economy. The apex court had then said that the Centre may consider setting up of a three-member experts committee to look into the issue of regulating the multinational accounting firms (MAFs) operating in India.
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An Outlook issue in August last year had brought to light how as a profession chartered accountants were facing their worst crisis of credibility with allegations of money laundering staining their white collars forever. One of the articles in this package by S. Gurumurthy had particularly looked at how foreign firms had shattered the ethical legacy that drove the professional standards of Indian CAs.
According to the TOI report, the cabinet on Wednesday will discuss a proposal from the ministry of corporate affairs to allow for creation of posts, paving the way for setting up NFRA with a chairman and up to 15 members.
ICAI has been resisting the change as it will be rendered toothless, with education and conducting exams being left as its main role.
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Speaking on the PNB scam, Finance Minister Arun Jaitley had blamedinadequate oversight by regulators and auditors, saying they should have a “third eye” to detect frauds.
