ICAI's guidance note on fraud reporting release deferred

The Institute of Chartered Accountants of India (ICAI) has prepared a new guidance note for reporting suspected frauds, but will only formally release it once parliament passes the Companies Amendment Bill 2014, its president Manoj Fadnis said on Friday.

"Under the Companies Act 2013, there was no concept of materiality for the auditors to decide as to when they should report a matter concerning fraud. But the Companies Amendment Bill 2014 has given powers to set a threshold limit where this reporting would become applicable," Fadnis told media persons here.

"While the guidance note on our end is ready, but its formal release has been deferred by a year. Once the Companies Amendment Bill 2014 is passed and any rules are framed thereunder in this regard, we will formally release it," said Fadnis.

While existing law mandates that an auditor should report a fraud being committed against a company by its officers or employees, it uses the term "reasons to believe" as the threshold for the auditor to act. In the proposed amendment, there are provisions for the threshold to be determined in monetary form, explained Fadnis.

"So once the amendment is passed and the threshold is determined in monetary or materialistic form, we will incorporate that in the note and formally release it," he said.

In pursuance of a memorandum of understanding with the Employee's Provident Fund Organisation (EPFO), the institute has also undertaken a pilot study project to design the strategy for a smooth migration and transition to accrual system of accounting from existing accounting system.

The apex body of the accountants, which has recently recommended bringing NGOs under a single and independent regulatory body, said it was yet to get a response on the issue from the government.

"Currently NGOs are regulated by several bodies which creates a problem. So we had suggested that they be brought under one regulatory authority. However, we are yet to get a response from the government on this," Fadnis said.

--Indo-Asian News service

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