Although the Union Cabinet has given the nod to establish a separate regulator for CAs, it seems like SEBI still wants to regulate auditors.
The Ministry of Corporate Affairs (MCA) is not convinced with the idea of chartered accountants and auditors being regulated by the Securities and Exchange Board of India (SEBI). The Union Cabinet had given the nod to establish the National Financial Regulatory Authority (NFRA) to regulate auditors in March 2018.
A source close to the development told Moneycontrol, “The Ministry of Corporate Affair has supported the proposal of SEBI’s corporate governance committee [headed by Uday Kotak] of a separate regulator for chartered accountants. Following which the government has initiated the NFRA process. It will be the NFRA that will have all powers to regulate chartered accounts individually and firms or auditors.”
Another MCA source said, “Section 132 of the Companies Act, 2013, provides that no other institutes or body shall initiate or continue any proceeding in matters of misconduct where NFRA has initiated an investigation. There will be an overlapping situation in case SEBI investigates auditors or chartered accountants.”
In a recent SEBI board meeting, it was pointed out, “While some fiduciaries such as merchant bankers, credit rating agencies, custodian, debenture trustees and registrars for certain issues are registered with SEBI under specific regulations notified for the purpose. However, other fiduciaries such as practicing chartered accountants, practicing company secretaries, cost accountants, valuers and monitoring agencies who undertake third-party fiduciary duty/assignment/engagement from issuers or intermediaries as required under various SEBI regulations, are not registered with SEBI.”
Meanwhile, the MCA is investigating 42 listed companies whose auditors resigned abruptly by May-end. The probe will focus on finding whether there were any financial irregularities at the firms along with ascertaining the real reason behind the auditors’ resignations.
SEBI had earlier passed an order against Price Waterhouse in the Satyam fraud case after almost a decade since the incident occurred. As far as the Nirav Modi case is concerned, Finance Minister Arun Jaitley had raised concern on the work of internal or external auditors. On Chartered Accountant Day 2017, Prime Minister Narendra Modi had raised concerns of auditors not doing their work properly.
The Institute of Chartered Accountant of India is believed to have not taken any action against wrongdoing CAs.An MCA source said, “After demonetization and the Nirav Modi scam, it is the sudden resignation of auditors of companies that is troubling authorities. Hence, it only makes sense to ensure auditors and chartered accountants are properly regulated."