In a bid to have quality audit standards being practised in the country, the ministry of corporate affairs (MCA) is re-working the guiding framework for auditors.

According to the senior government official, the government is considering to further streamline and strengthen the provisions for auditors under the Companies Act, 2013.

"The MCA is working on strengthening framework for auditors and is in active consultations with stakeholders to further tighten the loopholes," the official said, "The aim behind reworking the current framework for auditors is to ensure the arm's length distance between the core and non-core business of auditors to avoid conflict of interest."

The move comes at a time when the role of auditors has come under the scanner for alleged violations, including in the Infrastructure Leasing & Financial Services (IL&FS) case.

"When all the corporate frauds, crises came one after the other, we ran after chartered accountants. I think they are facing the most heat today... the statutory auditors," corporate affairs secretary Injeti Srinivas had recently said while speaking at a national seminar on valuation.

"They are facing the most heat. Why? Because of very strong auditing standards, accounting standards, an institution for the chartered accountants and now NFRA (National Financial Reporting Authority) have come," he had said.

According to the official, the three options that government is immediately considering which could help in strengthening the architecture for auditors include, "Expanding the scope of the list of prohibited roles for auditors notified under the Companies Act."

"Secondly, to cap the percentage of revenue that can be generated from non-audit businesses as compared to the percentage of revenue earned through core audit business. And thirdly, to completely ban audit firms from providing non-core business," the official added.

However, these options are still under consultations and government would take a calibrated approach before exercising these options.

With recent cases of lapses by auditors, the corporate affairs ministry is also of a view that there is an urgent need to re-look at the "tick-box" compliance procedures followed by auditors in the country.

Meanwhile, on being asked about the scare amongst auditors especially considering the move of the government asking the National Company Law Tribunal (NCLT) to bar Deloitte Haskin and Sells and BSR and Co for alleged lapses in auditing the books of IL&FS Financial Services Ltd (IFIN), the officials tried to soothe the nerves.

The official said, “The government is clear on not banning any network of auditors. The government will not give any disproportionate punishment to any brand. The action taken by the government is as per the rules and law prescribed under the Companies Act, 2013."

"By banning a particular firm, the government is not barring any brand name from functioning in India. All the government wants is that the auditors should be gatekeepers to avoid frauds and should flag concerns at the right time and should not collude with the management by concealing information." the official added. #casansaar (Source - CNBC18)