Members to soon get a scoring model to rate audit quality
The CA Institute and the National Financial Reporting Authority are yet to come on the same page as far as the fraud related responsibilities of an auditor is concerned, going by the stance of the new President of the Institute of Chartered Accountants of India , Nihar Jambusaria on this front.
He was responding to a question on the increased trust deficit on the auditing fraternity, post the series of audit and corporate failures like Kingfisher Airlines, IL&FS and DHFL. This position of the new ICAI President is in contrast to the NFRA Chairman R Sridharan’s well-publicised view in December last year, who said that the audit fraternity must forget the “watchdog and not bloodhound” description as this “serious misconception” had a very “far-reaching consequences”.
Jambusaria said,“Many stakeholders don’t understand the scope of audit because of which perception gap arises. So in the meantime when people’s expectations increase, our advice to auditors is to be a little more careful. Wherever you find things fishy, alert the audit committee or suggest a forensic audit. But the scope of an audit is not an investigation. The ICAI is trying to communicate this to the SFIO, the EOW and the government. At the most, an auditor can sensitise the management. He cannot convert an audit into an investigation.”
The ICAI will soon roll out an ‘Audit Quality Maturity Model’ for its members to self assess the audit quality in their firms. Jambusaria said that they will be asked to take a self proficiency test around quality aspects of their audit work and will be assignd a score. He added that this will be “purely voluntary” to begin with. “Maybe after a year, it can be made mandatory for audit firms of public interest entities,” said Debhashis Mitra, Vice President, ICAI.
Jambsusaria said that the ICAI’s Auditing and Assurance Standards Board will soon issue guidance to members on the latest MCA directive asking corporates to disclose the profits or loss incurred by them in dealing with cryptocurrency or virtual currency. It is understood that the MCA had not consulted the ICAI before making such disclosure mandatory for corporates in their financial statements.