OCTOBER 23, 2017

By Dr Parvinder Sohi Behuria, IRS (Retd.), Chairperson, QRB

2017 is a watershed year not only for the government in its efforts to clean up the economy but also for the Quality Review Board (QRB) established under the Chartered Accountants Act, 1949 as it completes its first decade.

A 'quality audit' is achieved when the auditor's opinion on financial statements can be relied upon and with a view to improving the quality of audit services in the country, the Central Government constituted a Quality Review Board (QRB)- by Gazette Notification GSR 448(E) –in 2007.

QRB has been constituted as an independent body to review the quality of services rendered by chartered accountants in the country and its review process contributes towards an increasingly robust and transparent financial reporting system in the country.

The role of Chartered Accountants (CAs) in nation building has been highlighted by the Hon'ble Prime Minister of India Shri Narendra Modi ji in his speech delivered on the 68th CA day (1st July, 2017). They have been recognized as important stakeholders in Government's endeavor towards a transparent economy.

Shell companies and other companies suppressing revenue and indulging in fudging of accounts are some of the vehicles of contaminating the economy. To stop these malpractices, a quality audit is imperative.

Quality Review Board also guides the CAs to improve the quality of services and adherence to various statutory and other regulatory requirements. It is a robust set-up where the central government nominates the chairperson and five members. Members are nominated from amongst the persons of eminence having experience in the field of law, economics, business, finance or accountancy. The current Board, for example, has senior representatives from the Ministry of Corporate Affairs, Ministry of Law & Justice, Comptroller & Auditor General of India (CAG) and market regulator Securities & Exchange Board of India (SEBI). The Institute of Chartered Accountants of India (ICAI) also nominates five members. Majority of members of QRB are independent of the profession.

Since FY 2012-13, QRB has formalised a distinct and strong system of independent review of statutory audit services of the audit firms auditing accounts of top listed and other public interest entities in India.

QRB's reviews involve assessment of the work of statutory auditors while carrying out their statutory audit function so that QRB is able to assess (a) the quality of audit and reporting by the statutory auditors; and (b) the quality control framework adopted by the audit firms in conducting audit.

The major focus of the reviews is on compliance with technical standards, relevant laws & regulations, quality of reporting and firm's quality control framework.

Since FY 2012-13, QRB has selected 585 review assignments for review of statutory audits of 443 top listed and other public interest entities in India. QRB has selected about 300 Audit firms, who had performed these audits, for conducting their reviews according to a set procedure and timeline. The selected entities range from various industries/sectors, and represent more than 85% market cap of the stocks listed on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE).

Since FY 2012-13, based upon 331 completed reviews, 29 cases have been recommended to the ICAI Council for consideration for further action, including disciplinary action and in 181 cases appropriate advisories have been issued by the QRB to the concerned audit firms highlighting their shortcomings and advising them towards improvement in the quality of their services.

The whole review mechanism is a strong deterrent to errant audit practices. Also, a huge number of audit firms have reacted responsibly by taking action to improve compliance and overall audit quality.

Not just in India but internationally also, QRB has initiated dialogue for co-operation with International Forum of Independent Audit Regulators (IFIAR) as well as independent audit regulators of various other countries.

It is believed that reinforcing market confidence through audit reliability and increasing audit transparency are real challenges today. Overall, the practice of quality audit and audit quality review conducted by QRB will usher in greater reliability and transparency and increase confidence in audits in the country.

QRB's litmus test in numbers since FY 2012-13

The QRB website http://www.qrbca.in can be visited for more information on the role and functions of QRB.

(The views expressed are strictly personal.)