ICAI referendum on auditor rotation

R Bupathy, president, ICAI, told Business Standard: "The executive council has decided to hold a referendum and seek the views of all its members on the issue." He added that the concept would not be implemented if the majority of the institute's members decided against it.

Bupathy said the executive council would soon finalise the modalities of the referendum. "We will frame a questionnaire and seek our members' views either through our journal or by putting it on our website," he said.

The subtle change in the ICAI executive council's decision of July 22 reflects the intense lobbying among the council members on the concept of auditor rotation.

A council member said the earlier decision was in stark contrast to the recommendations of the Naresh Chandra committee on corporate-auditor relationship, which had said rotation of auditors was not practical in the Indian context.

The idea of rotation had come up several times over the last 15 years, but no decision was taken since several council members were also partners in large audit firms.

The rotation of auditors would adversely affect the large firms, especially the big four multinational consulting firms, since it would result in uncertainty in their income from long-standing corporate plans.

The institute's executive council also discussed whether the concept of auditor rotation should be coupled with the concept of joint auditors. Council members said even this issue would be decided through a referendum.