Letters: Regulation needed

With reference to the piece, "India Inc needs choice in auditing" (September 26) by Vishesh C Chandiok and Yogesh Sharma, mandatory firm rotation (MFR) in auditing presents a great opportunity to medium-sized audit firms in India to scale up their operations and join the big league in the audit profession.

If such MFR is coupled with loosening of existing guidelines for audit firms relating to advertising, solicitation and affiliation to foreign networks, it is likely to provide further boost to small and medium-sized audit firms in India.

There is bound to be a significant amount of churning in the auditors of listed and other large companies once MFR comes into effect after April 2017. Whether this increased volatility will enhance auditor independence and increase the size of the audit profession or lead to its shrinkage due to disincentives - in the form of class action suits, higher regulatory oversight and increased compliance costs for companies - is something only time will tell.

At present, the audit profession in India is focusing on new requirements, including the audits of internal financial controls over financial reporting and audits in accordance with Ind AS standards (a quantum leap compared to the existing accounting standards in India).

In a democratic country with a free market, the success of any profession ultimately depends on its ability to regulate itself so as to reduce the gap between its performance and the expectations of its stakeholders.

Srijit Basu Gurgaon

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