ICAI to expand peer review mechanism for auditors: Aniket Talati

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ICAI to expand peer review mechanism for auditors: Aniket Talati

NEW DELHI : The Institute of Chartered Accountants of India (ICAI) is set to widen its peer review mechanism for audit firms to ensure transparency and audit quality, the self regulator’s newly elected President Aniket Sunil Talati said in an interview emphasizing that the watchdog will not hesitate to give exemplary punishment to erring professionals.

Talati said that ICAI’s peer review, a way of checking the processes followed by an audit firm by an external and independent audit professional, which currently applies to firms that audit listed companies, will be extended to all audit firms with five or more partners from 1 July.

ICAI has in the past removed many professionals from practice for specified periods and in some cases, for life, as part of its disciplinary exercise, Talati said. ICAI President’s emphasis on the track record of the watchdog’s disciplinary actions comes at a time a parallel regulator, the National Financial Reporting Authority (NFRA) which is tasked with ensuring the audit quality of listed and large unlisted businesses considered as ‘public interest entities,’ has been proactive in its disciplinary actions.

“We have removed certain Chartered Accountants for life. We have imposed the highest penalty which is available under the law to chartered accountants. My request to you would be to visit the Institute’s website. We are uploading these orders,” Talati said. He, however, admitted that there may be a lack of public awareness about the steps taken by ICAI’s disciplinary committee that examines the conduct of professionals and passes orders. The committee has never been soft on professionals, he said.

Talati also said that the peer review mechanism, which is currently mandatory for firms that audit listed companies, will be extended to all audit firms with five or more partners from July 1.

“The peer review is a very important and very interesting concept. The third party verifies the audit firm’s documentation and the way the audit has been conducted and then issues a report,” said Talati. Peer review of a firm can be conducted by an individual chartered accountant.

A statement from ICAI said quoting Talati that 6,766 cases have been registered under a new disciplinary mechanism since 2007 till March 31, 2023, out of which decisions have been taken in the case of 4,249 cases (62.8%). The remaining cases are either at prima facie stage or at hearing stage. In the 2022-23 cycle, 112 meetings were held, hearings were concluded in 132 cases and punishments were awarded in 91 cases, the statement said.

Talati also said that ICAI is open to granting practicing rights in India to accountants from the UK and Canada, with which India is negotiating free trade agreements. “That is to say, if our members are given practice rights in those countries, then, on a reciprocal basis, we are happy to give them,” said Talati. The government had sought the views of ICAI on this matter, he said.

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