Recently, ICAI had virtualised the procedure of obtaining the no objection certificate. The NOC details are to be added to the UDIN number in the latest announcement from ICAI. ICAI is centralising the NOC policy. Every audit report has a UDIN number. The auditors generate UDIN when signing the audit report. Retired auditors sign the NOC. Auditors receive NOC from previous auditors. Auditors of the companies change on a rotational basis. The new auditor is supposed to get NOC from the previous auditor working in the same proposed role. The blog talks about the technical advancement and the importance of NOC in the evolving auditing profession.
Technical advancement:
The tax audit assignments without previous audit assignments are becoming a point of concern to the senior auditors. If a chartered accountant does duties without acquiring NOC, it is professional misconduct. The Panipat branch of ICAI is the first branch to implement the virtual NOC. The Twitter handle of popular personalities supports the virtualisation of NOC. Dinesh Wadera is a commentator on economic and public policy. CA Chirag Chauhan is an advocate for digitalization. Both have raised their voice supporting technological advancement in the auditing procedures. The signed document with a statement of no objection from the previous auditor is a time-consuming one. The centralised system is making changes with the support of technology to benefit the incoming auditors. The virtual NOC is the need of the hour. The following points explain the need for virtual NOC:
- The UDIN portal with the NOC section improves transparency.
- The virtual NOC aids the efficient functioning of the incoming and outgoing auditors.
- The online system helps reduce the processing time. The virtual document improves communication and reduces the delays.
- ICAI is focusing and working on the professional misconduct of chartered accountants. The improved system helps the chartered accountants to work efficiently without risk.
Importance of NOC:
The advantages of a centralised NOC system are described with the following points:
- New and young chartered accountants work to build trust. The new NOC policy reduces the stress on chartered accountants.
- ICAI values the time of the chartered accountants. By using technology, chartered accountants find ample time to acquire new clients. Client acquisition improves the revenue and growth of chartered accountants.
- The virtual NOC brings equality among the chartered accountants regardless of professional network and experience.
- The documented NOC from the UDIN portal enhances the professionalism and credibility of the auditors. The auditors approach the potential clients with self-confidence. The virtual NOC improves transparency and efficiency.
- The simplified process in the auditing and legal system saves time and empowers the professionals.
- A healthy environment promotes collaboration between the old and new auditors of the firm.
- The unpaid fee may be the reason for not issuing the NOC. The fee disputes are resolved through the NOC policy. The protocol for issuing the NOC is to ensure the quality standards in the auditing profession.
Appointment of auditors in India:
Listed companies appoint auditors according to the Companies Act, 2013. An Individual auditor or audit firm can audit 20 public companies. The upper limit of 20 audits applies to the listed companies. The one-person company, a private company with a share capital of less than 100 crores are excluded from the ceiling limit. An auditor can do a limitless audit of a one-person company and a private company. Section 44AB of the Income Tax Act says that the quality of audit is a matter of concern. So, CAs are allowed to be involved in 60 total audits per year. The term of audit is for five or ten consecutive years of operation. The following points explain the appointment process of an auditor or audit firm in India.
- In case of rotation of auditor or audit firm, the following points stand as the checklist:
- There should be a connection between the old and new auditor. If the old audit firm and new audit firm come under the same network
- or brand name the auditor firm is not eligible for the appointment.
- The same auditor is eligible to work after a break of five years.
- If one of the partners in the audit firm retires from the firm and joins the other firm. The other firm is ineligible to undertake the audit assignment. The partners certify the financial statement. The same signature in the financial statement is legally not allowed. So, the rotation of audit firms and appointment of audit firms is done after a detailed check.
- Section 177 of the Companies Act says that certain companies are required to constitute an audit committee. The audit committee decide the remuneration of the auditor. In other cases, the board will consider the appointment and remuneration of the auditor.
- After the appointment of an auditor, the company shall give the details through the E-Form ADT-1. The form is filled out after the general meeting. The company would send the details with attachments within 15 days to ROC. The attachments have the true copy of the resolution, offer letter, consent letter of the old auditor, and certificate released by the auditor.
Conclusion:
Auditor appointment and ADT-1 form are essential compliances as they promote financial transparency. NOC is not for the internal auditor. It is the process followed for working as an external auditor. The virtualisation of NOC is a step in moving the auditors towards simplification and technical advancement. The company conducts different types of audits as follows: internal audit, statutory audit, tax audit and concurrent audit. For these audits, it is essential to follow the guidelines laid down by ICAI.
