Company Act may be Amended to mandate joint audits for certain classes of companies [Company Law Committee]

Company Act may be Amended to mandate joint audits for certain classes of companies [Company Law Committee] As per the Company Law Committee Report, one of the suggestions of the Company Law Committee is to suitably amend the Company Act 2013 (CA-13) to enable the Central Government to mandate joint audits for such class or class of companies as may be prescribed by the Central Government. In the case of a joint audit, the provisions concerning the extent of liability of individual auditors should also be accordingly provided in CA-13. Read the Report of The Company Law Committee Discussions on mandating joint audits for a class of companies have surfaced previously. In 2003, an ICAI study group had considered whether there should be a joint audit system involving firms of different sizes. The study recommended that a framework or a set of guidelines be issued to mandate that a single auditor would not audit companies beyond a particular size. However, noting the several implementation issues that may ensue, it suggested that such a mandate required further deliberation. Similarly, in 2021, the RBI released new guidelines for statutory auditors of financial entities to enhance independence and address concentration issues. The guidelines require mandatory joint audits for entities having an asset size of Rs. 15,000 crore and above. Currently, under CA-13, carrying out a joint audit is the prerogative of the company’s members. The Committee deliberated the need for mandating joint audits for companies with a public interest. However, it was of the opinion that given the expenses associated with joint audits, the mandate should be restricted to a class or classes of companies as the Central Government may deem appropriate. The Committee was of the opinion that if joint audits were to be made mandatory, this would also require an analysis of the liability of such joint In this regard, attention may be drawn to the ICAI Statement on Standard Auditing & Assurance Practices on the Responsibility of Joint Auditors. According to the statement, each joint auditor will be liable only for the work allotted to her pursuant to mutual discussions with other auditor/s and part-taking in the joint audit.