CA (Auditors) of Large companies to face ban on Non-Audit Work

The Company Law Committee has opined that companies, where the public interest is inherent, must only avail audit-related services from their auditors, and non-audit services of any kind, directly or indirectly, should be not be rendered by the statutory auditors to the company or its holding, subsidiary or associate company(ies).

Refer: Company Law Committee Report

Interestingly, the Committee also suggested to allow Companies not having public interest to take non-audit services from their auditors. The committee deliberated that while Section 144 allows the Central Government to prescribe non-audit services for one or more companies, there is a strong need to formulate different lists for different classes of companies. It felt that companies that do not have a public interest may avail some of the currently prohibited non-audit services from their auditors.

The Committee has also suggested harsh penal consequences for Auditors deviating from auditing standards & duties of auditors.

Additionally one more suggestion was that NFRA should be empowered to take action against CA for professional or other misconduct. This one came particulary because, as per data with the MCA, approximately 11,000 auditors had not filed NFRA 2 – an annual return to be filed by auditors under Rule 5 of the NFRA Rules, 2018.

Besides that Company Act may be Amended to mandate joint audits for certain classes of companies.