Confederation of Indian Industries (CII), Assocham, and Finance Industry Development Council (FIDC) have all written to the central bank about the problems companies would face in implementing the proposed regulations for appointment of statutory auditors.
Several industry leaders have also spoken to the RBI privately to highlight the challenges that the new rules pose, people aware of the development told ET.
The central bank had on April 27 issued guidelines for appointment of statutory auditors of commercial banks, NBFCs and housing finance companies, mandating sweeping changes to provisions regarding selection of auditors.
Some prescriptions in the circular need further deliberations, review, and revisit for appropriate modification as the regulations in present form will cause severe implementation challenges – due to time constraints and Covid disruption – and hardship to the banks and NBFCs, Assocham said in its letter.
The guidelines do not prescribe any transitional provisions (barring less than six months for NBFCs to implement) and, therefore, companies and auditors practically have no time to adequately understand, plan and successfully manage the changes, it said. Many industry players, too, sought more time to implement new guidelines.
“We strongly support RBI’s desire for audit reform; however, the same needs to be phased in over 3-5 years, just like mandatory audit rotation was introduced in Companies Act 2013 but made effective only FY18,” said Vishesh Chandiok, CEO of consulting and auditing firm Grant Thornton Bharat. “‘Bolt from the blue’ regulation has never delivered on its original intent – for example SOX (Sarbanese-Oxley Act in the US) post Enron, which was relaxed for smaller companies, as the US started losing listings to other markets,” he said.
With the new provisions coming into immediate effect, companies are staring at a series of pressing problems including time constraints in selecting new auditors, joint auditors and facilitating the transition process to multiple auditors, dealing with supply side constraints, and managing practical challenges that the raging pandemic poses.