Peer Review of Firms Auditing Larger Unlisted Companies must from July: ICAI President

The Institute of Chartered Accountants of India (ICAI) will make the ‘peer review’ system essential for even unlisted enterprises beginning July 1 to improve audit quality, according to Aniket Sunil Talati, the institute’s new president.

Currently, only publicly traded companies are required to conduct such peer evaluations. Talati stated that the proposed peer review will apply to unlisted firms with five or more owners. During a peer review, an independent auditor often verifies a firm’s audit process, processes, and paperwork and issues a report. “He can also identify flaws in the (firm’s) audit process. So the ICAI is putting in place a very good check-and-balance system,” ICAI President remarked.

In response to a question about the proposed joint audit of a certain class of firms by the Ministry of Corporate Affairs’ Company Law Committee, Talati stated that the ICAI supports this plan. “The ICAI supports improving audit quality,” he said. However, large audit companies are said to be hostile to this suggestion. A joint audit is conducted by two or more firms and results in a single report. Except for banks and public sector institutions, the joint audit is now entirely optional.

RECIPROCITY IN BUSINESS DEALS

As India negotiates free trade agreements (FTAs) with the United Kingdom and Canada, the ICAI has chosen to support proposals to allow auditors from these countries to practise in India, but only on a “reciprocity basis,” according to Talati. “If they allow our auditors to practise in their jurisdictions, we have no objection to allowing them to practise here,” he continued.

Talati stated that auditing service exports have grown in recent years, increasing by 29-30% in the past financial year. Overall service exports increased by over 27% to $323 billion in FY23.

Talati stated that the ICAI has gone into mutual recognition agreements with the top auditing bodies in eight nations in order to expand its worldwide presence and recognition. Canada, Australia, New Zealand, South Africa, Ireland, the United Kingdom, and Malaysia are among them.