“As per the new norms, there shall be joint audits in certain entities beyond a threshold. Can having two auditors or more instead of one impact the quality of audit? Certainly not. Having more than one opinion is always better,” said Amarjit Chopra, past president of the Institute of Chartered Accountants of India.
The central bank’s recent norms governing the functioning of auditors at financial firms have drawn its share of opposition. But several other auditors have backed the new directives, arguing that the changes would simultaneously enhance oversight standards while breaking the dominance of a few.
A few large auditors and the industry have indicated that the RBI’s new norms for auditors could negatively impact audit quality, causing unnecessary disruptions. What are your views?
As per the new norms, there shall be joint audits in certain entities beyond a threshold. Can having two auditors or more instead of one impact the quality of audit? Certainly not. Having more than one opinion is always better. The concept of joint audits has worked very well at Public Sector Banks (PSBs), Public Sector Undertakings (PSUs) and in certain corporations as well. So, I do not see challenges here.
There are allegations that the changes are being implemented in a hurry, without consultations…
Generally, it is seen that anything that gets delayed is postponed indefinitely. The RBI is simply trying to implement the remedial measures as quickly as possible. It will be wrong to say that there is strong opposition to the new norms from auditors… you may say a few auditors whose interests are affected are opposing the changes. But that is bound to happen. Have we seen industry associations commenting when there are cases of fund diversions or accounting manipulations by certain business houses? Have they ever debarred such business entities and their promoters to be their members? I sincerely wish that RBI takes a stance that may accommodate a few genuine concerns without yielding ground on critical issues. It may allow some kind of level playing field to mid-sized Indian firms and provide them the impetus to grow.
International investors look for reputed brands of audit firms when investing in a company and the RBI’s rules could be seen to be discouraging the big firms…
Investors generally look at the integrity of their business partners and above all, the quality of the project. If they are convinced that the investments will give fair returns, those investments will certainly happen. To an extent, the larger firms have been able to market their services based on brand value. But have some of the investors not realised that things have gone wrong despite these firms being the auditors? And surprisingly, this has happened internationally and not only in India.
What are your views on the investments necessary in the auditing industry itself?
On the incentives to invest in audit, what applies to the Big 8 or 10 firms applies to mid-sized firms as well. Why should they invest in audit in case they feel that there is no level playing field? The Big 8 or 10 were investing in audit as they found that income from non-audit services to the audit clients or the firms under the same network was far more lucrative. Restrictions on these practices are bound to pinch them more than anything else. And unless the government and various regulators see the pride in developing Indian firms by appropriate measures, the concept of Aatmanirbhar Bharat would only be on paper.