ICAI forms Group to examine Issues raised in SC Judgment on Foreign Accounting Firms

The Institute of Chartered Accountants of India (ICAI) has formed a group to examine the issues raised by the Supreme Court in its judgment on multi-national Accounting Firms wherein it has issued the following directions to the Central Government, Enforcement Directorate (ED) and ICAI.

1. The Union of India may constitute a three member Committee of experts to look into the question whether and to what extent the statutory framework to enforce the letter and spirit of Sections 25 and 29 of the CA Act and the statutory Code of Conduct for the CAs requires revisit so as to appropriately discipline and regulate MAFs. The Committee may also consider the need for an appropriate legislation on the pattern of Sarbanes Oxley Act, 2002 and Dodd-Frank Wall Street Reform and Consumer Protection Act, 2010 in the US or any other appropriate mechanism for oversight of profession of the auditors. The question whether on account of conflict of interest of auditors with consultants, the auditors’ profession may need an exclusive oversight body may be examined. The Committee may examine the Study Group and the Expert Group Reports referred to above, apart from any other material. It may also consider steps for effective enforcement of the provisions of the FDI policy and the FEMA Regulations referred to above.
2. It may identify the remedial measures which may then be considered by appropriate authorities. The Committee may call for suggestions from all concerned. Such Committee may be constituted within two months. Report of the Committee may be submitted within three months thereafter. The UOI may take further action after due consideration of such report.
3. The ED may complete the pending investigation within three months;
4. ICAI may further examine all the related issues at the appropriate level as far as possible.

The Management Committee of ICAI at its 21st meeting held on 20th March, 2018 at New Delhi considered the matter and decided to constitute a Group to examine the issues related to the activities and operation of Multinational Accounting Firms in India in the light of the aforesaid Judgement of the Hon’ble Supreme Court and to submit its recommendations to the Management Committee.

Accordingly, the President, in terms of the decision taken by the Management Committee at its 21st meeting and endorsed by the Council at its 374th meeting held in March 2018 has constituted the aforesaid Group consisting of the following members:-

1. Prafulla P. Chhajed, Vice-President (Convenor)
2. S.B. Zaware, Chairman, Accounting Standards Board
3. Shyam Lal Agarwal, Chairman, Auditing & Assurance Standard Board
4. Sanjiv K. Chaudhary, Chairman, Ethical Standards Board
5. Mukesh Singh Kushwah, Chairman, Peer Review Board
6. (Dr.) Debashis Mitra, Chairman, Corporate Laws & Corporate Governance Committee
7. Ranjeet Kumar Agarwal, Chairman, Professional Development Committee
8. Vijay Jhalani, Government Nominee

Shri S.V. Krishnamohan, Chief Legal Advisor will be the Secretary to the Group.

The terms of reference to the Group shall be as under: –

To review the existing legal framework regarding the entry and operation of MAFs in India in the light of the Supreme Court Judgement dated 23rd February 2018 and suggest measures for effective implementation of the said Judgement;

To suggest changes, wherever required for making appropriate recommendations to the Central Government and other regulators with respect to regulating all aspects of MAF entry and operations thereof;

To co-ordinate with the Committee of Experts to be set up by the Government of India in terms of the Judgement dated 23rd February 2018 of the Hon’ble Supreme Court;

To examine the jurisdiction and other related issues arising out of SEBI’s order dated 10th January 2018 on Price Water House and suggest the way forward.

To suggest any other measures relating to the above and all other incidental matters thereto arising from the Judgement of the Hon’ble Supreme Court.

The Group has been requested to meet on regular basis at least once a week and submit its report to the Council within one month.