A consultation paper to examine the existing provisions of law and make suitable amendments therein to enhance audit independence and accountability has been placed and need suggestions/comments.
- Whether to reduce the number of audits per one audit firm/ auditor?
- Whether to reduce or set the number of partners under one audit firm?
- How can those Big-4’s burden be reduced? Which other audit firms are in a position to compete with them and reduce the workload of Big4?
- Whether the auditors in listed companies to be appointed from a separate auditors ‘ panel to be repaired by NFRA?
- Whether non-audit services can be included in the list u/s 144?
- Whether the Joint Audit for bigger companies should be made compulsory?
- What should be the threshold for the bigger companies?
Economic Concentration of audit [Big 4] – Positive & Negative effects on the economy
Most of the large global corporations use the Big Four accounting companies to audit their financial statements.This audit industry concentration of listed companies is characterized by an oligopoly of “Big Four” audit firms and in large-company audits would result in inadequate levels of competition.
Finding a new auditor would be more complicated because
- Less competition in many geographic markets where some of these companies do not have a significant presence.
- The lack of sufficient auditing experience by the remaining companies, in particular industries.
- Many other businesses are not independent because of the provision of non-audit services
The Companies Act, 2013 provides mandatory audit firm rotation and non-audit services In order to tackle this economic concentration of audit. The main purpose of this provision is to increase the number of audit firms capable of carrying out the most complex audits.
Non-audit services not to be taken by auditors
It has been noted that some of the audit firms are observing self-regulation and are making decisions not to participate in non-attested work such as consultancy and transaction advisory services from listed companies that they are auditing. Such a move that comes in the midst of auditors who are facing heat in high-profile corporate scandals seems a welcome change. Deloitte announced recently that it will not underatake any non- audit services in public domain.i.e. listed entities with Banks & Insurance Companies in particular.
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