‘Auditors need to fulfil EU quality norms to operate in Europe’

Indian auditors would need to fulfil quality assurance standards set by the European Union (EU) to be able to audit for Indian companies listed in different European exchanges. This would be put into effect from 2011, Mr Rahul Roy, Director, Ernst and Young, and past President, Institute of Chartered Accountants of India (ICAI), said here last week.If Indian auditors fail to fulfil these quality assurance norms, they will not be allowed to operate in European countries, according to the 8th Company Law Directive on Statutory Audit issued by the EU, he said.There are over 150 Indian audit firms currently operating in Europe.Speaking on the sidelines of a seminar on International Financial Reporting Standards (IFRS) organised by ICAI, Mr Roy told reporters, “A number of Indian conglomerates today set up subsidiaries in European countries or get listed in European exchanges for fund raising. If the Indian auditors cannot abide by the guidelines in time, these conglomerates would have to appoint separate auditors from abroad for foreign operations.”The audit firms would also need to be registered with the respective audit authorities in the European countries for continuing operations, he said.While the EU has issued these directives for all non-European countries in effect from June 1, 2008, audit firms in India along with some other countries have been exempted from following the norms till December 2010. “From 2011 onwards, Indian auditing firms would have to publish transparency reports on the Web sites declaring details such as names of their clientele, total income from fees, share of total income from auditing, etc,” Mr Roy said.The EU guidelines would also require the Quality Review Board formed by the Indian Government last year to be upgraded to an independent Public Oversight System, Mr Roy said. Pointing out that there are certain bottlenecks against timely implementation of IFRS in India by 2011, he said, “The Government needs to change laws related to the Company Act.” CA dearth There is also a huge dearth of Chartered Accountants in India, he said, pointing out that while in the UK and the US there is one such accountant in every 750 of the population, in India there is one for every 10,000. – www.thehindubusinessline.com