One of the most lucrative options for CA Firms is to get empanelled and conduct Audits of PSU. But one issue which has barely been properly addressed is that how can a CA Firm get empanelled and what is the procedure of becoming an Auditor of a PSU? The Answers to these commonly asked Questions have been explained below.
Basic Eligibility Criteria for Selection as Auditor of PSU
Only Chartered Accountant firms in India with at least one full time FCA (Partner/Sole Proprietor) can apply for empanelment to the office of the CAG of India for allotment of audit of Public Sector Undertakings.
Full time partner does not include a person who is
- A partner in other firms
- Employed full time/part time elsewhere, practicing in their own name or engaged in practice otherwise
- Partner whose compensation from the firm is below the prescribed limit and does not commensurate with the total compensation (share of profit, remuneration and interest on capital etc) paid/payable to the partners during the assessment year
Procedure for Selection of Auditors of PSU’s whose Audit Fees is up to Rs. 1.50 Lakhs
The selection is made by correlating the point score earned by each firm of Chartered Accountants towards empanelment with the size of the audit fee. The point score is based upon the experience of the firm, number of partners and their association with the firm, number of Chartered Accountant employees, as detailed below:-
|Experience of the Firm||0.5 point for every calendar year – Maximum 15(Counted from the Date of Constitution of the Firm with 1 Full-Time FCA or the date of joining of the firm by the existing partner having the longest association with the firm whichever is late)|
|Full Time FCA Partners||5 Points each for the first 5 partners and 2.5 points each for 6th partner onwards|
|Full Time ACA Partners||3 Points each for first 5 partners and 1.5 points each from 6th partner onwards|
Points for Long Association with the same firm
|5 Points for each partner above 25 Years4 Points for each partner above 20 Years|
3 Points for each partner above 15 Years
2 Points for each partner above 10 Years
1 Points for each partner above 5 Years
|Full Time CA Employees||1 point each for first 20 C.A Employees|
Maximum 20 points
|CISA/ISA Qualified Partners||2 points each for three partners -Maximum 6 points|
|CISA/ISA Qualified Employees||1 point each – Maximum 3 points for 3 employees.|
Procedure for Selection of Auditors of PSU’s whose Audit Fees is more than Rs. 1.50 Lakhs
Criteria for short-listing eligible CA Firm’s for allotment of Major Audits are as under:
- The firm should have at least 6 CA’s (out of which 5 should be Full Time Partners and 1 could be a full time paid CA employee), which is indicative of capacity to handle big audits .
- At least one partner should have an association of 10 years or more with the firm and at least 3 partners of the firm should have an association of 5 years or more with the firm and the remaining two should have an association of one year or more with the firm, to demonstrate stability over time.
- The firm itself should have been in existence for 10 years or more, to prove that it is a well established firm.
Allotment of major audits is based not only on the size of the firm considering the number of partners, and their association with the firm, number of Chartered Accountant employees, and the Zone in which the firms’ head office is located but also on the basis of factors such as sectoral experience, service tax paid by the firm on assurance services, capability of handling big audits, past performance, eligibility of the firm to conduct a particular audit, location of the firm’s branch offices etc.
The information submitted by the applicant firms is subject to verification with the details to be provided by the Institute of Chartered Accountants of India and any other organization(s) as may be required. If any of the information so furnished is later found to be not correct or false or there has been suppression of material information, the firm would stand disqualified from empanelment/allotment of audit for 3 years and might also be liable for disciplinary action under the Chartered Accountants Act, 1949 and the regulations framed there under.
Status of Existing Empaneled Firms
Firms that are already empanelled with the CAG’s office need to only modify the information that is already available with the CAG’s office for changes, if any, as also to indicate whether they continue to be interested in empanelment.