The draft rules of the new Companies Act have suggested that the maximum number of audit clients for a firm be fixed at 30. This opens up the possibility of audit firms to attract many more clients as the existing law restricted the number to 20. | |
| This, combined with the fact that the rules have proposed that chartered accountant firms be allowed to have 50 partners, will allow auditors to ramp up their business. |
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| The actual limit on maximum number of clients would increase manifold as the limit in case of a firm of auditors is taken individually for each of the partner of the firm who is not in full time employment elsewhere. |
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| While facilitating the firms to grow bigger and have more clients, the draft rules restrict the scope of services that an auditor can provide to his client. |
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| The draft rules specify that the statutory auditor cannot provide services as an internal auditor of the company; or any of its subsidiaries or holding companies. |
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| The auditor would also not render services for maintenance of accounts of the company or any of its subsidiaries or holding companies. |
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| Even providing liaison services for and on behalf of an audit client with other companies, financial institutions and government departments is not allowed unless such services are connected with his professional work such as certification or representation work for submission to such authorities. |
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| Further, services as a special auditor as per the terms of Section 60 of the company or any of its subsidiaries or holding company will also not be permitted as per the draft rules. |
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| The statutory auditor will also not serve as a cost auditor of the company or any of its subsidiaries or holding company. |
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| The existing Companies Act does not detail such restrictions. However, according to an expert, "Most restrictions are already in force for providing other services by a statutory auditor through the guidelines issued by the Institute of Chartered Accountants of India (ICAI) and circulars issued by the government." |
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