The CA Institute has cause for cheer with the Veerappa Moily headed Standing Committee on Finance recommending that it was not in favour of establishing a separate regulator--independent of audit profession--for auditors.

This stance of the Parliamentary Panel is being widely read as its veto for setting up of the National Financial Reporting Authority (NFRA), which was proposed to be established under the Companies Act as separate body(independent of CA Institute) to regulate audit quality and protect public interest.

The ball is now in the Corporate Affairs Minister Arun Jaitley's court as his ministry will have to take a crucial decision of whether the Government should go ahead and establish NFRA. Technically, the Government need not accept a recommendation of a Standing Committee.

Interestingly, Finance Ministry and SEBI Chairman had already written to Corporate Affairs Ministry for the establishment of NFRA as it would lead to enhanced institutional oversight over auditors and would lead to enhanced market integrity and transparency as well as protect interest of investors and other stakeholders like banks, lending institutions, suppliers etc.

MOILY PANEL

In its report on Companies (amendment) Bill 2016--tabled in Lok Sabha few days back--the Moily headed Parliamentary Panel had said that the existing mechanism on oversight of corporate audit under the ICAI Act should be streamlined and strengthened "without needlessly adding to regulatory levels".

This may be undertaken in consultations with the Institute of Chartered Accountants of India (ICAI), which is the designated elected self-regulatory body for professional audit in the country, the Standing Committee report said.

It also suggested that necessary amendments, if required, be brought to the ICAI Act so that adequate transparency can be ensured in maintaining accounting and auditing norms as well as ethical standards with a view to protecting the interests of investors and stakeholders.

REPORT HAILED

Reacting to the Standing Committee recommendation, M Devaraja Reddy, President, ICAI said that he welcomed the Panel's view that existing system under ICAI Act needed to be strengthened and no new regulatory level should be needlessly added.

"We welcome it as our concerns (on NFRA) has been recognised by the Standing Committee. We are now hopeful that the Finance and Corporate Affairs Minister Jaitley will take a positive look into this matter", Reddy told BusinessLine.

The CA Institute has been opposed to the establishment of NFRA as it would end taking away the oversight power of the ICAI on its members. The ICAI sees constitution of NFRA as an interference of audit profession.

Amarjit Chopra, Chairman of National Advisory Committee on Accounting Standards (NACAS) said that the message of the Standing Committee on Finance was loud and clear "The Standing Committee has agreed with the CA Institute's viewpoint that there is no need for another regulator", Chopra said.

Chopra said that the CA Institute should now step in to make its disciplinary proceedings more stringent and also bring within its ambit firms also for action.

As on date, the CA Institute has no powers to take disciplinary action against CA firms if any of its partners were to indulge in misconduct. The action can be initiated only against the erring partner.

"There could be changes in CA Act itself to give more powers to CA Institute to take action against both members and firms. Right now there is no provision to take action against firms, probably in times to come the Institute will be given powers to take action against firms also", he added. #casansaar (The Hindu Business)