Govt will consider mandatory joint Audit Plan for Big Companies

The government is reconsidering a plan to require joint audits of major corporations by modifying the Companies Act, as it considers wider considerations on the subject of correcting audit responsibility when things go wrong, as per the source..

In a joint audit, two or more audit firms conduct a company’s audit and generate a single report. The plan aims to improve audit quality.

Large audit companies have vehemently opposed the joint audit idea, citing concerns about having to split audit money with smaller businesses, according to a second source, while the Institute of Chartered Accountants of India (ICAI) has approved it. The Big Four audit firms are EY, PwC, Deloitte, and KPMG.

Except for banks and public-sector institutions, joint auditing is now entirely optional. The Reserve Bank of India made joint audits mandatory for financial firms with assets of Rs.15,000 crore or more in 2021.

“Some people believe that in a joint audit, one auditor can potentially pass the buck to another if fraud is discovered later. So, how will accountability be distributed between the two, and how will a framework for this be developed? All of these issues must be thoroughly examined. So, following expanded discussions, the government will make a final decision on whether to broaden the mandate of the joint audit,” said the Source.

Large audit firms have warned that collaborative audits will increase company expenses while providing no proven benefits in terms of audit quality.