Re. 1 Audit Fee for Construction Company: Chartered Accountants’ Bid raises Questions on Sustainability of Audit Profession [Read Report]
This low bidding devalues the profession by reducing statutory audit to a formality rather than a rigorous process. Also, this raises independence concerns, as auditors compensated nominally may struggle to maintain professional skepticism
Chartered Accountants, Audit Fee -Construction Company
Chartered Accountants, Audit Fee -Construction Company
The appointment of a statutory auditor for Raajmarg Infra Investment Managers Private Limited (RIIMPL), a company under the National HighwaysAuthority of India (NHAI), has triggered heated debate in professionals.
A firm of chartered accountants secured the mandate by quoting an audit fee of just Re. 1, which raised serious questions about the sustainability and value of the audit profession. Also how can other firms survive?
While most participating audit firms quoted professional fees ranging from ₹25,000 to ₹27.49L (exclusive of taxes), M/s Chandra Gupta & Associates quoted a symbolic Re. 1 as its professional fee, making it the lowest (L1) bidder.
CA Ashok Gupta, Partner of Chandra Gupta & Associates has refused to comment on this matter.
The appointment of an auditor at a fee of Re. 1 may be legally valid and the law does not bar them for quoting such a price, but it raises important questions: should the public sector tenders allow token bids that undervalue the whole governance and how can regulatory bodies ensure that statutory audits retain their credibility and independence.
Committee’s Recommendation
The evaluation committee, comprising senior officials from NHAI and RIIMPL, carefully reviewed eligibility conditions, peer review certification, undertakings, and financial bids. Despite an initial technical mismatch in documentation (a name discrepancy in the Digital Signature Certificate), clarifications were sought and accepted.
The committee ultimately recommended M/s Chandra Gupta & Associates as L1, declaring them eligible for appointment as Statutory Auditor of RIIMPL, subject to competent authority approval and compliance with the Companies Act, 2013. This is the only firm who quoted the one digit bid.
Apart from Chandra Gupta & Associates, quoting a very low amount of Re.1, there is another firm, Reshma & Co, quoted Rs. 1,100 as the audit fee which stands as L2 bidder. The question is, while bidding such a low amount, what could be the motive of the firm?
While thinking critically and sarcastically, in one way, it’s just kind of a helping attitude to a construction company or they don’t need the financial backing from this audit but just an exposure.
Either way, this just ruins the audit profession and causes difficulty to fellow professionals.
Concerns Over Professional Valuation
A Re. 1 audit fee undermines the essence of statutory audit, which is expected to ensure transparency, accountability, and financial integrity of public infrastructure entities.
Such low valued price quotes could be pre-planned to throw out all the other firms that have submitted the bids. It devalues the profession by reducing statutory audit to a formality rather than a rigorous process. Also, this raises independence concerns, as auditors compensated nominally may struggle to maintain professional skepticism.
It is feared that symbolic bids could encourage a “race to the bottom” in public sector appointments, where firms underquote to secure assignments, depending on indirect benefits or future consulting opportunities.
While competitive bidding is mandated under laws, experts argue that professional services like statutory audit require a balance between cost and quality. The Institute of Chartered Accountants of India (ICAI) has, in the past, said the need for minimum fee structures for audits of public interest entities, though enforcement remains limited.
The undervalued bidding of the accounting firm itself shows that there is some other interest with them rather than just being an auditor for the construction company. Apart from the bidding amount and committee’s recommendation for placing them as statutory auditor, the rest of the things are speculative in nature, which can be confirmed only after thorough background checks by the concerned authorities.
Public Comments
This matter was first highlighted by CA Himank Singhla, who always tried to raise his against the unethical practices or any such injustices.
https://x.com/CAHimankSingla/status/1970155475573551172
Below his post, the public, including many chartered accountants has commented on the in-depth darks of the bidding.
According to one person, who posted his opinion in ‘X’ that “Very clearly other benefit would flow to the auditor. Have heard of such quotes on consulting assignments. For statutory audit, this should not be accepted. And this thing of tender for audit should be done away with.”
Another person said that “Appropriate action should be initiated against CA firms that are quoting unreasonably low fees and thereby undermining the dignity and value of our profession.”
ICAI’s Role
To preserve the credibility, independence, and harmony within the audit profession, it is very important for the Institute to interfere. Just as ICAI introduced the cap of 60 assignments to ensure fair distribution of work, a similar initiative is now required to set a minimum audit fee threshold.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
