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MCA halt peer audit review plan

India’s Ministry of Corporate Affairs (MCA) has ruled out independently appointed peer reviews of listed company audits, a proposal that was mooted in the wake of the Satyam fraud, due to a lack of available talent.

Capital markets regulator Securities and Exchange Board of India (SEBI) and the government originally flagged the idea of appointing auditors to provide a second opinion to audits of 30 Bombay Stock Exchange and 50 National Stock Exchange companies.

ICAI sources claimed the government was unable to find enough trained auditors with 10-15 years of experience to carry out the work. 

“It is now decided that the audit reports will be vetted by a panel of auditors appointed by the financial advisory board of the Institute of Chartered Accountants of India

(ICAI), only for cases where any irregularities are found or regulatory or supervisory need requires a second opinion,” MCA officials said.

Under the original proposal, regulators would have appointed independent auditors to carry out the work. This included the Reserve Bank of India dealing with bank audits, SEBI appointing auditors to listed companies and the Insurance Regulatory and Development Authority dealing with insurance companies.

The Satyam Computer Services scandal unfolded in January 2009, when financial irregularities totalling about $1.44 billion were discovered at the Indian software company.

Price Waterhouse, an Indian affiliate firm of PricewaterhouseCoopers (PwC), was Satyam’s statutory auditor at the time the irregularities allegedly took place. Satyam has subsequently ditched Price Waterhouse as its auditor.

 

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