More jobs for auditors
Standard, October 07, 2012
Number of firms that an auditor can take on capped at 20
amendments made in the Companies Bill, cleared by the Cabinet
onn Thursday, is expected to create more jobs for auditors as
the government has decided to cap the number of companies an
individual auditor can take on as clients, at 20.
?The ceiling will
help to create many more jobs for auditors and promote economic
democracy,? says Pradeep S Mehta, secretary general, CUTS
The move, though
triggered through a recommendation made by the Parliamentary
Standing Committee on Finance, also gives a breather to big
audit firms as they can continue to have large number of
clients. The Standing Committee suggested limiting the number of
clients according to auditing firms and not auditors. However,
amendments cleared by the Cabinet run through the number of
companies that can be served by an individual auditor, whereas
it does not talk about the audit firm.
While foreign audit
firms are not allowed to operate in India, experts say most of
the big auditing firms themselves offer consultancy services for
major corporates, while for auditing they function through
proxies. Hence, most of these big audit firms would benefit from
the relaxation in cap.
?It is possible that
there are skeletons in the cupboard which may or may not be seen
by the auditors. So it is for good that such appointments are
not just approved by the board of directors but also validated
by shareholders,? says Sushma Berlia, co-founder & chancellor,
Apeejay Stya University, who is also an expert on corporate
According to Berlia,
auditors should not be worried with the move as this would just
add an extra element of transparency and governance rather than
creating an issue for them to feel threatened about their job.
Besides, through the
amendments in the Bill, the government is also set to bring in
more clarity on criminal liability of auditors. However, experts
view that auditors should not necessarily be made criminally
liable for civil offence as it can also be a result of
negligence and bad judgement. ?Unless a fraud is found and hence
proved, it is not desirable to bring in criminal penalty for
civil offences,? Berlia said.
The amendments to
the Companies Bill, 2011 is likely to be tabled in the
Parliament during winter session.
This news can also be viewed at: