The government is looking to step up its oversight over three professional institutes, including the Institute of Chartered Accountants of India (ICAI), for their failure to discipline errant auditors, despite being ticked off by Prime Minister Narendra Modi 15 months ago.

The government has pulled out a report of the high-level committee headed by retired bureaucrat Meenakshi Datta Ghosh, that has suggested a massive overhaul of the disciplinary actions taken by the three professional bodies — ICAI, Institute of Company Secretaries of India and Institute of Costs and Works Accountants of India — although the focus is largely on the auditors.

The committee, whose report has not been made public, had recommended that the ministry of corporate affairs should appoint directors of discipline and secretaries in all the three professional institutes. These functionaries are proposed to be government officers and may be appointed in the same way as those in autonomous bodies.

Disciplinary platform should be independent of the institutes, the committee suggested, while pointing out that the current mechanism needs to be restructured. It has sought a one-year timeframe to dispose off cases, instead of three-to-five years taken at present. For this, a single-stage process in the final stage is proposed, instead of two at present. Similarly, it had called for reducing the practice of frequent adjournments.

The move comes weeks after the government set up the National Financial Reporting Authority that will take over ICAI’s disciplinary powers related to listed and large companies. In addition, audit firms, which were hitherto unregulated, have been brought under the jurisdiction of the new entity. Although the law empowers the government to transfer all disciplinary powers to NFRA, it has refrained from doing so, despite auditors attempting to block the new entity.

ICAI has refused to even disclose data on action initiated by it after the PM’s prod, including on cases referred to it by government agencies, sources told TOI. ICAI did not respond to TOI’s request for data.

An assessment of 440 listed and public interest companies by Quality Review Board, covering 85% of the market cap of BSE and NSE, has shown that less than 25% of the cases referred by it to ICAI were taken up for disciplinary action. The outcome of these cases is not known.

In the past, ICAI has countered the government, saying that a formal complaint was often not registered by its agencies and only a reference was made. Sources in the government suggested that even this was enough reason for the institute to at least kick off disciplinary action. “A reference does not make anyone guilty. You can investigate the case,” said a source.

The committee had also asked the government to merge the disciplinary committee and the board of discipline and said members elected to the institutes’ councils, the apex decision-making body, should recuse themselves in case they are subjected to any disciplinary action. #casansaar (Source - Times of India)