Rotation of auditors may hit accounting

MUMBAI: The finance ministry-appointed Naresh Chandra committee on accounting practices has been told in recent hearings that the rotation of auditors will not serve the purpose of increasing objectivity and independence among auditors.
The committee, which met in Mumbai on Thursday with past presidents of the ICAI and representatives of the Investors’ Grievances Forum, was reportedly informed that separate audit firms could decide to form ‘‘a cartel of sorts’’ and work alternately for the same client.The practice (of rotating auditors) may come to an end.
Even the proposal to rotate audit partners within the same firm was treated with scepticism. It was felt that rotating partners would not ensure objectivity, since the terms of reference in a single firm are likely to be similar. Last week, the ICAI central council had discussed the issue of rotation of partners. While there was a view that the ICAI should independently go for the change without being asked by the government, sources said, ‘‘this is not yet a decision. It still has to come on the agenda of the council meeting. It is too premature to assume that the ICAI will opt for the move.’’