The Committee of Experts, constituted by Ministry of Corporate Affairs, has released its report on regulating audit firms and the Networks last month wherein the committee suggested to permit the Chartered Accountants and CA firms to advertise to solicit the clients subject to conditions. The report has been released for public comments and feedback.
In the report, the COE recommended that the Chartered Accountants and CA firms should be permitted to advertise their services and solicit work subject to the following conditions: (i) A CA or CA firm shall not solicit work by advertising or other forms of solicitation in a manner that is false, misleading, or deceptive. (ii) A CA or CA firm shall not promote or market abilities to provide professional services or make any claim which is false, misleading or deceptive. (iii) A CA or CA firm shall not make exaggerated claims for services offered. (iv) A CA or CA firm shall not indulge in disparaging references or unsubstantiated comparison to the work of others.
It further explained that the promotional efforts or advertisement would be false, misleading, or deceptive if they contain any claim or representation that would likely cause a reasonable person to be misled or deceived. To regulate this, the Part I of the First Schedule to the Chartered Accountants Act, 1949, and Code of Ethics, 2009 shall be amended.
Currently, the Chartered Accountants may advertise through a write-up setting out the services provided by him or his firm and particulars of his firm subject to Advertisement Guidelines issued by the Council of ICAI.
The Direction given by the Council under Clause (7) of Part I of the First Schedule to the CA Act provides that a chartered accountant in practice/firm cannot give advertisement in press. However, a special exemption has been made as regards publication of the name and address of a member or that of his firm, with the description chartered accountant(s), in an advertisement appearing in the press in the circumstances as listed below , provided that the advertisement is not displayed more prominently than is usual for such advertisements or the name of the member or that of his firm with the designation chartered accountant(s) appears in type not bolder than the substance of the advertisement.
The Committee was constituted on April 20, 2018, pursuant to the directions of the Supreme Court in the matter of S. Sukumar versus The Secretary, Institute of Chartered Accountants of India. The Committee consisted of Shri Anurag Agarwal, Joint Secretary, Ministry of Corporate Affairs, Shri Sudhanshu Pandey, Additional Secretary, Department of Commerce and Shri Ravinder, Joint Secretary, Department of Industrial Policy and Promotion.
The Committee scrutinized the networking arrangements adopted by the big four audit firms commonly referred to as multi-national accounting firms to understand their legal structure and method of operation. The Committee also addressed serious concerns like a conflict of interest and transparency arising out of non-audit services provided by auditors and their network and suggested necessary checks and balances. Further, the report deals with the issue of concentration of market power which is another contemporary problem in the market for audit services.
The Committee also found the establishment of the National Financial Reporting Authority (NFRA) as a necessary institutional reform which would align the Indian audit landscape with the global position.
Subscribe Taxscan Premium to view the Judgment
