ICAI to develop audit quality indicators; seeks to bolster competence of Indian audit firms | ICAI News
In efforts to strengthen the quality of auditing activities, chartered accountants” apex body ICAI will develop a framework for audit quality indicators that will also help Indian audit firms and auditors to compete globally.
ICAI President Atul Kumar Gupta said that the current quality of audit is not being benchmarked, and the focus is to have customized audit quality indicators.
The Indian Institute of Chartered Accountants (ICAI) has also decided to open a Centre for Audit Quality at Jaipur. The plans assume significance against the backdrop of the government proposing changes in the existing regulations to enhance audit independence and accountability According to Gupta, the centre would be developing audit quality indicators, carry out capacity building activities and gradually there can be an “audit quality maturity model” whereby the quality can be benchmarked.
“When we will have the audit quality maturity model, we will be guiding the members on what kind of steps should one use, capacity building, procedures to be followed…,” he said. There are around 80,000 audit firms in the country and the count of practicing auditors is about 1.5 lakh. The institute has nearly 3 lakh members and half of them are working in the industry.
“The idea is to develop a framework for audit quality indicators that will help Indian audit firms and auditors compete globally,” Gupta told PTI.
In February, the corporate affairs ministry came out with a consultation paper to examine the existing provisions of law and make suitable amendments therein to enhance audit independence and accountability.
The ministry’s consultation paper also came amid several auditors and auditing entities coming under the regulatory lens for alleged misdoings.
One of the proposals in the consultation paper was about the development of a ”Composite Audit Quality Index” to improve the accountability of auditors and audit firms.
“To build a culture of quality audit, and to have a ready-reckoner for measurement of audit quality, an index may be developed involving qualitative and quantitative measures – at both engagement level and firm level. It may be made mandatory for big listed companies and voluntary for others.
“This index will also facilitate companies in objectively assessing the auditors/audit firms before their appointment,” as per the consultation paper.
A final decision on the proposals, for which stakeholders” suggestions have also been gathered, is yet to be taken by the ministry.
Elaborating on the concept of audit quality indicators, he said they can be adopted by audit firms on a voluntary basis to maintain, improve and showcase their quality level.
Noting that development of audit quality indicators would be a continuous exercise, Gupta said there are international indicators available and those have to be customized as per local requirements.
Compared to foreign countries, India has more number of small and medium audit practitioners. So, the audit quality indicators need to be customized, he added.
Gupta said the centre would be doing a lot of research as well as capacity building, and training programmes for the members and the industry.
Research and innovation would also be carried out in the area of audit for improving overall audit quality.
To ensure the quality of audit works, the framework of the peer review board and financial review board is already in place.