Policy of Empanelment of CA Firms and Selection of Auditors of PSUs

Policy of Empanelment of CA Firms and Selection of Auditors of PSUs

Empanelment of CA firms

chartered Accountant firms in India with at least one full time [1] FCA (Partner/Sole Proprietor) can apply for empanelment with this office for allotment of audit of Public Sector Undertakings.  

The criteria for empanelment and selection of statutory auditors have been arrived at after due consultation with the Institute of Chartered Accountants of India.

 Selection of CA firms for appointment as statutory auditors of PSUs whose audit fees are up to Rs 1.50 lakh

The selection is made by correlating the point score earned by each firm of Chartered Accountants towards empanelment with the size of the audit fee. The point score[2] is based upon the experience of the firm, number of partners and their association [3] with the firm, number of Chartered Accountant employees, as detailed below:  

 Selection of CA firms for appointment as statutory auditors of PSUs where audit fee is above Rs 1.50 lakh ( Major Audits)

(a)      Criteria for short-listing eligible firms of CAs for allotment of Major audits are as under:

(i)       The firm should have at least 6 CAs (out of which 5 should be full time partners and one could be a full time paid CA employee), which is indicative of capacity to handle big audits .

(ii)       At least one partner should have an association of 10 years or more with the firm and at least 3 partners of the firm should have an association of 5 years or more with the firm and the remaining two should have an association of one year or more with the firm, to demonstrate stability over time.

(iii)   The firm itself should have been in existence for 10 years or more, to prove that it is a well established firm.

(b)   Allotment of major audits is based not only on the size of the firm considering the number of partners, and their association with the firm, number of Chartered Accountant employees, and the Zone in which the firms’ head office is located but also on the basis of factors such as sectoral experience, service tax paid by the firm on assurance services, capability of handling big audits, past performance, eligibility of the firm to conduct a particular audit, location of the firm’s branch offices etc.

[1] Full time partner does not include

 A person who is

(a) a partner in other firms

(b)  Employed full time/part time elsewhere, practicing in their own name or engaged in practice otherwise or engaged in other activity which would be deemed to be in practice under Section 2(2) of the Chartered Accountants Act, 1949.

 (c)    i)    Partners whose  total compensation @ from the firm is below the following limit:

Head office of the firms located in Delhi, Mumbai, Chennai, Kolkata, Bangalore and Hyderabad:

            ACA partner       Rs. 1.80 lakh in a year (Rs. 15000/- per month)

            FCA partner        Rs. 3.00 lakh in a year (Rs. 25000/- per month)

Head office of the firms located other Places:

             ACA partner       Rs. 1.20 lakh in a year (Rs. 10000/- per month)

             FCA partner        Rs. 1.80 lakh in a year (Rs. 15000/- per month)

(c)  ii)   A partner whose total compensation@ from the firm is less than:

            Firms having more than 14 partners                       1%

            Firms having 10 to 14 partners                             3%

            Firms having 5 to 9 partners                                  5%

            Firms having less than 5 partners                           8%

@Total compensation = Sum total of share of profit, remuneration and interest on capital.

[2] All members (sole proprietors/partners/ CA employees) will get points if they were exclusively associated with the firm throughout the calendar year immediately preceding the year of empanelment.

[3] In case of merger, the partners of the merging firms will be assigned points after one year of merger and points for partner’s association to be given after five years from the date of merger.

[4]  Basis of points for Turnover of the firm