The move will increase public’s confidence in auditor independence and quality, Deloitte says
Deloitte is the third auditor to take such a call, after Grant Thornton and PW India
The Indian affiliate of Deloitte Haskins and Sells on Sunday said the auditor and its network firms in the country will no longer offer non-audit services to “public interest entities" they audit in India, three days after Price Waterhouse India made a similar announcement.
“We believe this would increase the public’s confidence in auditor independence and quality and will remove ambiguity in a public and business environment that demands greater clarity about our services," a Deloitte spokesperson said.
Deloitte defines public interest entities under the norms prescribed by Institute of Chartered Accounts of India (ICAI), which includes all listed companies, banks and insurance companies. According to Deloitte, this voluntary action is in the spirit of self-regulation. The non-audit services, as considered by Deloitte, extends beyond non-audit services permissible under prevailing rules and regulations in India.
Deloitte is the third auditor to take such a voluntary call. The first was Grant Thornton, which said the firm and its affiliates had decided not to take up non-audit work such as consulting and transaction advisory services from listed firms that are being audited by them from July 2019.
In the absence of clear regulatory norms prescribing which are the non-audit services and applicable to which set of companies, audit firms are taking their own interpretations. For instance, PW India has taken National Financial Regulatory Authority as a benchmark for identifying companies and non-audit services. Deloitte has taken ICAI as a standard. Grant Thornton’s universe is limited to listed companies.
The latest voluntary decisions follow a corporate affairs ministry discussion paper floated on 7 February, proposing five issues which, according to it, hinder the independence of auditors. These include providing non-audit services, fees charged by auditors, lax quality review procedures within firms, personal relationships with clients, non-rotation of audit partners and appointment of auditors by the firms.
The paper suggested that such appointments be done by external authorities such as the Comptroller and Auditor General. According to experts, such voluntary actions are good but not a substitute for clear regulatory norms as this can be open to interpretations and different benchmarks for implementation. “Auditors should not be permitted to render non-audit services to their audit clients. There should not be any exception to this," said Dinesh Kanabar, founder, Dhruva Advisors, which provides audit and consultancy services.