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Government to enhance audit independence and accountability
Why is it in the news?
- The Centre has proposed significant amendments to existing regulations to enhance independence and accountability of auditors.
More in the news
- Why these changes?
(1) It is against the backdrop of instances of many auditors and auditing entities coming under the regulatory lens for alleged misdoings.
(2) There is economic concentration of the “Big Four” audit firms.
(3) There is need to build the capacity of home-grown Indian firms that may need to be at par with global organisations in terms of audit procedures and manpower capacity.
- The ‘Big Four’, which operate in India through a network of local chartered accountants firms.
- The paper has suggestions for curbing five “threats” for the independence of auditors. The threats pertain to:
(1) Self-interest
(2) Self-review
(3) Advocacy
(4) Familiarity
- The paper has sought:
(1) Comments on whether the number of audits under one audit firm or auditor needs to be reduced.
(2) Inspection of audit engagements and developing a ‘Composite Audit Quality Index’ to improve accountability of auditors and audit firms are among other proposals.
Source
The Hindu.