Necessary joint audit rule could not go a good distance in enhancing the standard of audits however may moderately deal with the difficulty of focus by giving small and mid-audit corporations larger entry to the markets, stated Helen Model, Chief Government Officer at international accounting physique, Affiliation of Licensed Chartered Accountants (ACCA).
“We don’t suppose there may be any proof to recommend that joint audit improves the standard of audit. The joint audit is launched extra as a matter of competitors throughout the market moderately than essentially understanding that there’s going to be a greater high quality of audit…It (joint audit) provides corporations extra entry to the components of the markets the place they don’t have entry to,” Model instructed ETCFO in an interview.
The ACCA head stated there are higher methods to reinforce the standard of audits and enhance the independence of auditors. She recommended necessary auditor rotation and a cooling-off interval between when the auditor is engaged with a big enterprise and earlier than it takes a big piece of labor once more from the identical consumer, amongst such measures. Additionally, she harassed that it is crucial for accounting our bodies to make sure integrity and ethics amongst professionals.
“When you may have the identical auditor for 25 years, there may be an erosion of independence. So, that rotation piece is essential. We additionally really feel, there ought to be a cooling-off interval between a serious enterprise having an auditor when that audit engagement ends. So, there ought to be a transparent cooling off interval earlier than they will take up different main items of labor for that enterprise,” Model stated.
Joint audits merely imply two auditors perform the statutory audit and put together a joint audit report as in comparison with one single auditor. Joint audits are used internationally, together with in India, Denmark, Germany, and Switzerland. In France, a joint audit grew to become a authorized requirement in 1966, whereas in South Africa, a joint audit is necessary for corporations working within the monetary providers sector. Within the US and the UK, joint audits should not necessary.
In India, voluntary adoption of joint audits is already offered below part 139(3)(b) of the Corporations Act, 2013, and Corporations (Audit and Auditor) Guidelines, 2014. The usual on auditing (SA299) “joint audit of monetary statements” additionally gives steerage on joint audit.
Amidst rising company failures and accounting lapses, regulators the world over, together with India, are more and more mulling necessary joint audits as a method to enhance audit high quality, improve independence in addition to enhance competitors within the markets, that are presently dominated by the Massive 4 auditors-Deloitte, EY, PwC, and KPMG. In April 2021, India made joint audits necessary for banks with property greater than Rs 15,000 crore ($2 billion). A authorities panel in India, earlier this 12 months, proposed a compulsory joint audit rule for public curiosity entities.
Reinforcing audit high quality
Accounting specialists say joint audits reinforce audit high quality and that they may very well be helpful in lowering the chance of over-familiarity by means of rotating the allocation of fieldwork between the joint auditors after a set variety of years. Additionally, they add, joint audits may increase competitors. On the similar time, in addition they say joint audits may even have disadvantages like larger audit charges, lack of accountability, and problem for corporations to nominate specialist auditors with adequate experience, amongst others.
World accounting physique ACCA, which is headquartered within the UK, has 219,000 members and 517,000 college students in 179 nations. It holds recognition for statutory audit functions in sure jurisdictions together with the UK, Eire, and Zimbabwe, and for tax functions in Australia and South Africa.