Policy of Empanelment of CA
Firms/LLPs and Selection of Auditors
A. Empanelment
of CA firms/LLPs
Chartered Accountant firms (firms) and Limited
Liability Partnerships (LLPs) in India with at least one full time [1] FCA Partner/FCA Sole Proprietor can
apply for empanelment with this office for the purpose of appointment of
auditors of Companies as per Section 139 (5) and 139(7) of the Companies Act
2013 and of Statutory Corporations/Autonomous Bodies as per the provisions of
their respective Acts.
The criteria
for empanelment and selection of statutory auditors have been arrived at after
due consultation with the Institute of Chartered Accountants of India.
All the empanelled firms/LLPs are awarded points. The
point score is calculated based on various parameters
which are enumerated below. In addition, in certain circumstances,
the firms/LLPs are not empaneled or empaneled but not
considered for appointment as auditors which are also explained below:
|
S.No. |
Parameters |
Points |
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|
Quantitative Parameters |
||||
|
1. |
Points [2][3] for full time CA partners/sole proprietor (Only upto 20 full time CA partners in terms of their
seniority as per their association with the firm/LLP) |
|||
|
1(a) |
Full time FCA Partners/sole proprietor |
3 points each |
The first 5 full time CA partners will get the points mentioned in the
adjacent column and remaining 15 full time CA partners will get half of these
points |
|
|
1(b) |
Full time ACA Partners |
2 points each |
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|
1(c) |
Association of full time CA partners/sole proprietor with the same
firm/LLP (considered with reference to the Formation Date or actual joining
date of CA partner/sole proprietor whichever is later) |
1 point for each full time CA partner/sole proprietor above 5 Years
and upto 10 Years |
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|
2 points for each full time CA partner/sole proprietor above 10 years |
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|
2. |
Points[2] for full time CA Employees (Only 20 full time CA
employees will be awarded points) |
One point each for 5 full time CA employees and half point each for
remaining 15 full time CA Employees |
||
|
3. |
Experience of the firm/LLP |
0.5 points for every calendar year - Maximum 10 points. Counted from the date of constitution of the firm/LLP with one full
time FCA or date of joining of the firm/LLP by the existing CA partner/sole
proprietor having the longest association with the firm/LLP whichever is
later. (Such date will be considered as Formation Date of the firm/LLP) |
||
|
4. |
Turnover of the firm/LLP from Audit Services only (as distinct from
other activities e.g. consultancy) [4] |
Maximum 10 points |
||
|
Qualitative Parameters |
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|
5. |
Firm/LLP peer reviewed by ICAI[5] |
Maximum 25 points |
||
|
6. |
Audit experience[6] |
Maximum 40 points |
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|
7. |
Points[2][3] for additional qualifications/continuous
skill upgradation of the full time CA Partners/sole proprietor
(Maximum 25 points) |
|||
|
7(a) |
i. Diploma in Information Systems (DISA) from ICAI ii. Certified
Information System Auditor (CISA) from ISACA, USA iii. Certified Public Accountant (CPA) from AICPA, USA iv. Certified Internal Auditor (CIA) from IIA, USA v. Certified Fraud Examiner (CFE) from ACFE, USA |
1.25 points each |
One full time CA Partner/sole proprietor will be awarded points for
one qualification only. Maximum 20 full time CA partners will be
awarded points |
|
|
7(b) |
Certification courses from ICAI in i. IND AS ii. Forensic
Accounting and Fraud Prevention iii. Public
Finance & Government Accounting iv. Concurrent
audit of Banks v. Anti
Money Laundering Law vi. Forex and
Treasury Management vii. Goods
and Service Tax |
1 point each |
||
|
8 |
Points[2] for additional qualifications/continuous
skill upgradation of the full time CA Employees (Maximum
20 points) |
|||
|
8(a) |
i. Diploma in Information Systems (DISA) from ICAI ii. Certified
Information System Auditor (CISA) from ISACA, USA iii. Certified
Public Accountant (CPA) from AICPA, USA iv. Certified
Internal Auditor (CIA) from IIA, USA v. Certified
Fraud Examiner (CFE) from ACFE, USA |
1 point each |
One full time CA Employee will be awarded points for one qualification
only. Maximum 20 full time CA employees will be awarded points |
|
|
8(b) |
Certification courses from ICAI in i. IND AS ii. Forensic
Accounting and Fraud Prevention iii. Public
Finance & Government Accounting iv. Concurrent
audit of Banks v. Anti
Money Laundering Law vi. Forex and
Treasury Management vii. Goods
and Service Tax |
0.5 point each |
||
|
Professional
Track Record |
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|
9 |
Professional Misconduct by a member as per ICAI |
The point score of the firm/LLP
will be reduced by 10 percent each for sole-proprietor, CA partner/s and CA
employee/s who is/are held guilty of professional misconduct during
the previous year under the Chartered Accountants Act
1949. Apart from deduction of points, the firm/LLP would not
be given any credit for the said Chartered Accountant/s. |
||
|
10 |
Unsatisfactory performance as auditor of a PSU |
The point score will be reduced
by 10 percent, in case the performance of the firm/LLP was found
unsatisfactory and the firm/LLP was issued an advisory by this
office to be more careful in future in the immediate preceding year. |
||
|
11. |
Refusal of Audit/s allotted by CAG |
The point score of the firm/LLP, will be reduced by 10
percent, in case, in the immediate preceding year, the firm/LLP had refused
the audit assigned to it by this office, for reasons other than being
disqualified to act as auditor of the assigned audit under the provisions of
any Act /statute or conditions issued by this office etc. In case, the firm/LLP refuses the allotted audit for the second time,
the firm/LLP would not be empanelled from the
subsequent year for a period of 5 years. |
||
|
12. |
Firm/LLP reprimanded by Quality
Review Board |
The point score of the firm/LLP, will be reduced by
10 percent, in case, in the immediate preceding year, the firm/LLP has been
issued an advisory by the Quality Review Board. |
||
|
13. |
Firm/LLP reprimanded by
National Financial Reporting Authority |
In case, in the immediate preceding year, the firm/LLP has been: a) issued/imposed an advisory / Caution/ Penalty(Monetary) – Deduction of 10
percent points b) debarred with/without penalty –
Not to be empanelled for the period for which debarred. |
||
|
14. |
Debarment of firm/LLP by any
Regulator or Government Authority |
In case a firm/LLP is debarred
by any Regulator or Government Authority, such firm/LLP will not to be
empanelled for the year/s for which debarred by such Regulator or Government
Authority. |
||
|
15. |
Conviction in cases filed by
CBI/ED and cases pending with these agencies |
CA Partner/CA employee convicted in cases filed by CBI/ED
– Firm/LLP with which the said CA Partner/CA employee is
associated, will not be empaneled. In respect of pending cases
where charge-sheet has been issued or the case is under-trial against the
firm/LLP/CA partner/CA employee –Firm/LLP will
not be
allotted any audit. |
||
B. Allotment
of Audits
Selection of firms/LLPs for appointment as auditors
where audit fee is up to Rs 5.00 lakh
The selection is made by correlating the point
score of each firm/LLP with the audit fee of the auditee unit.
Selection of firms/LLPs for appointment as auditors
where audit fee is more than Rs.5.00 lakh (Major Audits)
(a) Criteria for
short-listing eligible firms/LLPs of CAs for allotment of Major Audits are as
under:
(i) The
firm/LLP should have at least 6 full time CAs (out of which 5 should be full
time CA partners and one could be a full time paid CA employee), which is
indicative of capacity to handle big audits .
(ii) At least one full time CA
partner should have an association of 10 years or more with the firm/LLP and at
least 3 full time CA partners of the firm/LLP should have an association of 5
years or more with the firm/LLP and the remaining two full time CA partners
should have an association of one year or more with the firm/LLP, to
demonstrate stability over time.
(iii) The firm/LLP itself should have been in existence for
10 years or more, to prove that it is a well established
firm/LLP.
(iv) At least one of the full time CA partners of the firm/LLP must possess CISA
qualification from ISACA, USA or DISA qualification from ICAI.
(v) The firm/LLP should have audit experience of five years of audits
assigned by CAG.
(b) In addition to correlating the point score
earned by each firm/LLP with the audit fee of the auditee unit,
factors such as audit experience of the firm/LLP, capability of handling big
audits, past performance, eligibility of the firm/LLP to conduct a particular
audit, location of the firm’s/LLP’s branch offices etc. are also considered in
selection of auditors for Major Audits.
Rotation of Audits
i. The appointment of a firm/LLP as auditor will be
for a financial year unless special circumstances warrant appointment for a
longer period. The said statutory
auditor may be re-appointed on a year to year basis, however, the total period
of appointment including the initial appointment will not, ordinarily, exceed
three financial years. An auditor may not be re-appointed in case the firm/LLP becomes ineligible for the said audit,
its point score has reduced by more than
25 per cent over the previous year’s point score, is debarred from appointment for
the year or for any other legitimate reason as considered fit by this office.
ii. A firm/LLP who retires/surrenders from
audit of a Maharatna Company, shall not be entitled
for allotment of audit of any Maharatna Company for a
period of four years after such retirement/surrender.
iii. In case of a Maharatna/ Navratna Company, a firm/LLP after retiring/surrendering is
not considered for the same Company for a period of five years.
[1] Full time CA partner/sole-proprietor does
not include a person who is
(a) a CA partner
in other firms/LLPs or a sole proprietor
(b) Employed full time/part time elsewhere,
practicing in their own name or engaged in practice otherwise or
engaged in other activity which would be deemed to be in practice under Section
2(2) of the Chartered Accountants Act, 1949.
(c) i) A CA Partner/sole-proprietor
whose compensation $ from the firm/LLP during
previous financial year is below the following limit:
|
Category
of CA partner/sole-proprietor |
Empanelment
Year 2023-2024 |
Empanelment
Year 2024-2025 and onwards |
||
|
|
Head office of the firm/LLP located in Delhi, Mumbai, Chennai,
Kolkata, Bengaluru and Hyderabad |
Head office of the firm/LLP located at other Places |
Head office of the firm/LLP located in Delhi, Mumbai, Chennai,
Kolkata, Bengaluru and Hyderabad |
Head office of the firm/LLP located at other Places |
|
(Compensation
- Rs. in lakh per annum) |
||||
|
FCA |
4.50 |
2.70 |
6.00 |
3.60 |
|
ACA |
2.70 |
1.80 |
3.60 |
2.40 |
$ Compensation will be sum total of share of
profit, remuneration and interest on capital received by the CA
partner/sole-proprietor from the firm/LLP. Compensation
received by the CA partners who join during the previous financial year, will
be extrapolated to arrive at the deemed compensation for the complete financial
year. Compensation criteria of FCA will apply on CA partners/sole-proprietor
who becomes an FCA during the previous financial year or thereafter till 1st January
of year of filing application for empanelment.
(c) ii)
A CA partner whose individual percentage share in the total
compensation@ during the previous financial year is less
than:
Firms/LLPs
having more than 14 CA
partners 1%
Firms/LLPs
having 10 to 14 CA
partners
3%
Firms/LLPs
having 5 to 9 CA
partners 5%
Firms/LLPs
having less than 5 CA
partners
8%
@Total compensation will be sum total of share of profit,
remuneration and interest on capital from the
firm/LLP. Compensation received by the CA partners who joins
during the previous financial year, will be extrapolated to arrive at the deemed
compensation for the complete financial year and then will be added to the
compensation of other CA partners to arrive at total compensation.
(d) A CA partner/sole-proprietor whose professional
income from sources other than the firm/LLP (except as permitted by ICAI) is
more than the compensation (sum total of share of profit, remuneration and
interest on capital) from the firm/LLP.
Full time CA employee does not include a person
who is:
(a) a partner in
other firms/LLPs or is a sole-proprietor
(b) Employed full time/part time elsewhere,
practicing in their own name or engaged in practice otherwise or
engaged in other activity which would be deemed to be in practice under Section
2(2) of the Chartered Accountants Act, 1949.
[2] Sole
proprietors/CA partners/CA employees will get points if they
were exclusively associated with the firm/LLP throughout the calendar
year immediately preceding the year of empanelment. Association with
the firm/LLP prior to Formation Date will not be considered for any purpose.
[3] In case of merger, the proprietor/CA partners
of the merging firm/firms/LLP/LLPs will be assigned points after one calendar
year of merger. For the first five calendar years after merger, the
merging CA partner/s would be deemed to have joined the firm/LLP from the date
of merger. The benefit of earlier association of the merging CA
partners with the merging firm/LLP will be accorded to the merged firm/LLP only
after five calendar years from the date of merger.
[4] Basis of points for Turnover of the firm/LLP from Audit
Services only (as distinct from other activities e.g. consultancy):
|
Sr No. |
Head office of the
firm/LLP located in Mumbai, Delhi, Chennai, Kolkata, Bangalore,
Hyderabad |
Head office of the firm/LLP located at other Places |
||
|
Rs. in crore |
Points |
Rs. in crore |
Points |
|
|
1 |
Upto 1.00 |
No points |
Upto 0.60 |
No points |
|
2 |
>1.00 ----2.00 |
1 |
>0.60 ---1.20 |
1 |
|
3 |
>2.00 ----3.00 |
2 |
>1.20 ---1.80 |
2 |
|
4 |
>3.00 ----4.00 |
3 |
>1.80 ---2.40 |
3 |
|
5 |
>4.00 ----5.00 |
4 |
>2.40 ---3.00 |
4 |
|
6 |
>5.00 ----6.00 |
5 |
>3.00 ---3.60 |
5 |
|
7 |
>6.00 ----7.00 |
6 |
>3.60 ---4.20 |
6 |
|
8 |
>7.00 ----8.00 |
7 |
>4.20 ---4.80 |
7 |
|
9 |
>8.00 ----9.00 |
8 |
>4.80 ---5.40 |
8 |
|
10 |
>9.00 ----10.00 |
9 |
>5.40 ---6.00 |
9 |
|
11 |
Above 10.00 |
10 |
Above 6.00 |
10 |
[5] Basis of points for Peer Review Certificate from ICAI:
|
Sr. No. |
Firm/LLP
holding valid peer review certificate from ICAI on |
Points |
|
1 |
1st January
of the year of filing of online application |
5 |
|
2 |
1st January
of the year preceding to year referred in sr. no. 1 |
4 |
|
3 |
1st January
of the year preceding to year referred in sr. no. 2 |
4 |
|
4 |
1st January
of the year preceding to year referred in sr. no. 3 |
3 |
|
5 |
1st January
of the year preceding to year referred in sr. no. 4 |
3 |
|
6 |
1st January
of the year preceding to year referred in sr. no. 5 |
2 |
|
7 |
1st January
of the year preceding to year referred in sr. no. 6 |
2 |
|
8 |
1st January
of the year preceding to year referred in sr. no. 7 |
1 |
|
9 |
1st January
of the year preceding to year referred in sr. no. 8 |
1 |
|
|
Maximum
Points |
25 |
[6] Basis of points for audit experience
|
S.No. |
Type of
Audit |
Points
per assignment |
Maximum
points to be awarded |
|
1 |
Statutory
Audits - Corporate |
||
|
|
Turnover
above Rs. 40 crore but less than or equal to Rs.100
crore |
3
points |
20 |
|
|
Turnover
above Rs.100 crore but less than or equal to Rs.250 crore |
4
points |
|
|
|
Turnover
above Rs.250 crore |
5
points |
|
|
2 |
Statutory
Audits – Branch |
||
|
|
Turnover
above Rs.40 crore but less than or equal to Rs.60 crore |
1 point |
10 |
|
|
Turnover
above Rs.60 crore but less than or equal to Rs. 100
crore |
2
points |
|
|
|
Turnover
above Rs. 100 crore but less than or equal to Rs. 250 crore |
3
points |
|
|
|
Turnover
above Rs. 250 crore |
4
points |
|
|
3 |
Internal
Audit (Turnover of the auditee more than Rs.40
crore) |
2
points |
5 |
|
4 |
Audit
of Government Schemes (Expenditure certified above Rs.40
crore) |
2
points |
5 |
|
Maximum points scored by any firm/LLP in each of the above four
categories will be equated to the maximum points stipulated for the
respective category and points scored by other firms/LLPs in that category will
be discounted accordingly. For the year 2023-2024, points will be awarded on
the basis of UDIN data of ICAI for the years 2020-2021 and
2021-2022. This will eventually be scaled to 5 years by
2026-2027 by gradually adding one year on annual basis. |
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