A high-level committee has proposed an overhaul of the audit architecture, including a ban on non-audit work in “public interest” or large companies, and mandating auditors of holding companies to look into the accounts of subsidiaries.

The panel, whose recommendations were released for public comments, has suggested joint audits for certain classes of companies, in addition to specifically providing for forensic audit under the law.

There are several recommendations related to strengthening the National Financial Reporting Authority (NFRA), which was set up in the aftermath of the collapse of IL&FS. The NFRA has taken away some of the powers that earlier vested with the Institute of Chartered Accountants of India when it came to regulating CAs and taking di- sciplinary action.

The Companies Act provides a list of prohibited non-audit service. But the committee has said there is a need to revisit the list so that conflict of interest can be avoided and a different set of lists can be there for different classes of companies.

As reported by TOI on February 21, the restrictions are likely in the case of “public-interest companies”, which are under NFRA’s jurisdiction, including listed entities or those with a turnover of Rs 1,000 crore or debt of over Rs 500 crore, in addition to banks and insurance and power companies.

To bolster the NFRA, the committee has suggested that the agency be given powers to initiate action against chartered accountants or firms for non-compliance of provisions of the Companies Act, which do not quali- fy as “professional or other misconduct”. For instance, nearly 11,000 auditors have not filed their annual returns mandated by NFRA.

It was also recommended that NFRA should initiate action in case its orders are not complied with. There are several suggestions to make the agency an independent regulatory body.

In recent years, especially after the role of auditors came under the scanner in corporate scandals, the government has been seeking to tighten the rules and proposed amendments to the law. These include providing for a report in case of resignation and a standard format for audit qualifications — seen as steps in the same direction. The government is hoping to push the Bill during the monsoon or winter session of Parliament to ensure that the Companies Act is updated once again.