Indian government may amend Companies Act to boost local auditors
What's the story
The Ministry of Corporate Affairs (MCA) is considering amendments to the Companies Act. These changes are part of a larger effort to help domestic audit firms compete with global giants like Deloitte, PwC, EY, and KPMG. The proposed amendments could be introduced through the Companies Act Amendment Bill. One of the key proposals being considered is relaxing partner composition norms in audit firms.
Tender reforms
Changes in tender norms for government audits
Along with legislative changes, the government is also considering changes to tender norms. The aim is to increase the participation of domestic firms in large-value government audits. These audits are currently dominated by international players such as Deloitte and PwC. Proposed changes include making Indian firms mandatory participants in government tenders and changing eligibility criteria to allow a broader range of bidders.
Regulatory alignment
ICAI's role in aligning regulatory frameworks
The Institute of Chartered Accountants of India (ICAI) has been roped in to align regulatory frameworks with global practices. As part of this effort, the institute is finalizing a digital platform for CA firm mergers. These measures are likely to be implemented in the coming months alongside legislative action. The proposed amendments and changes aim to create a more level playing field for domestic audit firms against their international counterparts.
Proposed amendments
Amendments to Section 141(1) and Section 144
The proposed changes to the Companies Act also include amending Section 141(1). This provision currently requires that if a firm is appointed an auditor, a majority of its partners practicing in India must be chartered accountants. The government is also exploring changes to Section 144, which governs conflict-of-interest provisions. These changes are aimed at ensuring regulatory norms keep pace with evolving business models in the audit and advisory sector.