Chartered accountants, cost accountants and company secretaries—three classes of professionals recognized under the statute— have protested against the notification of the new companies law, with each saying that they will be hurt by it in various ways. 

While chartered accountants are worried about increased responsibility and accountability under the new Act, cost accountants and company secretaries say they will be rendered superfluous at more than 90% of companies, putting corporate governance at risk. However, others are of the view that the new rules will lead to the opening up of fresh opportunities and ensure that audit quality rises. 

Chartered accountants are outraged about mandatory joint audits that force one to take responsibility for the other's faults, company secretaries are furious about the ministry having scrapped the requirement for them in private companies, leading to job losses. 

Judicial pronouncements in the past have held that auditors are not bloodhounds, said chartered accountant KS Mehta of SS Kothari Mehta & Co. 

"It is practically not feasible for an auditor to make his audit more extensive within the limited timeframe allowed by Sebi (Securities and Exchange Board of India) for adoption of annual accounts than it is already doing," he said. "Companies want to release accounts within 30 days. While joint auditors for the same account may solve the problem to an extent, it is not acceptable by companies as it increases expenses as well as makes coordination more complex." 

The new rule making the entire body of partners responsible for any act of negligence by one will have a deleterious effect, he said. "The new rule will only encourage taking up of non-audit work by firms which are not registered and therefore, not subject to the discipline of the ICAI (Institute of Chartered Accountants of India)," said Mehta. 

ICAI has found fault with the rotation of auditors that's now required. "The auditors' rotation has (until) now been restricted to certain class of companies, leaving close to 90% of the companies outside the scope of rotation of auditors," said ICAI president C A K Raghu. 

Company secretaries say they are the worst affected. About 93% of India's 9 lakh companies are private, no longer needing the statutory services of a company secretary under the new rules. 

This will hit corporate governance, they warned. 

"This has made the future dark for 35,000 members of the CS institute and 4 lakh students. On the other hand, corporate governance of a large section of corporates is going to take a back seat," said SK Jain, a Mumbai-based company secretary. 

Cost accountants have been protesting against the rules from the draft stage itself, claiming that the scope of their work has also been curbed. The corporate affairs ministry is yet to notify the final rules for cost audit leading to confusion among professionals. 

"The section regarding cost audit and records has been notified effective April 1, 2014, but the rules governing the same are not," said Amit Apte, central council member of the Institute of Cost Accountants of India. "We are advising companies to follow the old rules till the time final rules for cost audit are notified." 

S Santhana Krishnan, chairman of the corporate laws committee of the chartered accountants' institute and member of the rules of the corporate affairs minstry, admitted that discharging professional functions will become more difficult. 

However, the new rules open up new opportunities, he said. 

"Some people have looked at the Act as an employment guarantee scheme. It is inappropriate. 

Those who believe they have lost opportunities will actually get more opportunities as per the new rules," said Krishnan. For example, cost accountants can now become internal auditors as well. 

Company secretaries and CFOs are part of key management personnel. Chartered accountants will get new consulting opportunities such as financial control, corporate governance etc, he said.  (Economic Times)