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CAs to be allowed to bid for audits

P Vaidyanathan Iyer in New Delhi

After 53 years, chartered accountants will now be able to openly bid for audit work or consultancy assignments tendered by multilateral institutions like the Asian Development Bank and the World Bank, and even government bodies.

Hitherto, the code of ethics of the regulator, the Institute of Chartered Accountants of India, did not allow its members to bid.

The high-powered council of ICAI, which met in Delhi recently, has in principle given approval to its members and chartered accountants' firms to submit bids for expressions of interest invited by various government departments and corporations.

Though no estimate of the market size for such work is available, ICAI officials said even small bodies like the district rural development authorities invited bids from private parties to undertake audit.

Government bodies insist on tendering because of fear of the Central Vigilance Commission.

The ICAI council had in its last meeting decided that though its members would be allowed to quote, they should not indulge in undercutting by quoting a fee lower than that of the auditor who was doing the work earlier.

"The cost of the last auditor can be obtained while informal discussions are on with the organisation relating to the scope and nature of work," said an ICAI official.

The ICAI code of ethics does not allow a chartered accountant to advertise or solicit work from private and government bodies.

It further prohibits them from participating in bids floated by multilateral institutions like the World Bank and the Asian Development Bank.

However, several chartered accountancy firms have management consultancy outfits which indirectly bid for such audit work.

ICAI officials said many chartered accountantcy firms could not bid since they could not afford to float a separate consultancy arm.

"With the council's decision, a level playing field has been created for all members, which will not only encourage competition but also ensure quality work," said an official.

In most of the cases where expressions of interest for audit work have been invited by government agencies, the L1 (lowest) bidder will generally bag the contract.

Now that the statutory restriction has been lifted, there will be healthy competition among audit firms to undertake work from private and government agencies.

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