Panel rules out rotation of auditors

MUMBAI: The Naresh Chandra committee''s final report on the appointment of auditors, regulation of the profession and the role of independent directors has shot down a proposal of rotation of auditors.
The report has also said that India does not need a regulatory body like the Public Oversight Board in the United States. The committee has recommended that the remuneration of independent directors of listed companies should be increased to give them an incentive for rendering services.
Earlier in the year, in consultative sessions with the Institute of Chartered Accountants of India (ICAI), this committee had been told that rotation of auditors will not increase their objectivity and independence.The committee was informed that separate audit firms could decide to form a cartel and work alternately for the same client.
The concept of rotation of auditors was first floated in 1972 and later turned down by the government. In 1997, the proposed Companies Bill had this provision, which was again swept under the carpet.
The latest report does not see the need for a separate body to govern the accounting profession; the committee feels there are enough regulators already, in the form of the ICAI, the Department of Company Affairs and the Securities and Exchange Board of India (SEBI).
The committee had earlier considered formation of a Public Oversight Board, like in the US, which helps assure regulators, investors and the public at large that audited financial statements of public corporations can be relied on to provide an accurate picture of the financial health of those companies. It is often called the cornerstone of the self-regulatory system that oversees the accounting profession in the US.
The committee was to submit its report to the government in October this year, but it asked for an extension of the deadline. The committee is chaired by Naresh Chandra, former ambassador to the US. Its members include ICAI chairman Ashok Chandak, Hindustan Lever v-p MK Sharma, ICICI deputy MD Kalpana Morparia, CMIE MD Mahesh Vyas, economist Omkar Goswami, DCA joint secretary Rajiv Mehrishi and CA Vikram Lodha.