The department is also considering a proposal to grant chartered accountants (CAs) the powers to issue compliance certificate under section 383A. Besides this, it is also contemplating a change in the manner in which the auditors qualification is stated in the audit reports. This is meant to bring to the specific notice of the shareholders, accountants' qualifications mentioned in the auditor's report.

These changes may be included in the Companies Bill 1997 and the Companies (Second Amendment) Bill 1999 expected to be tabled in the monsoon session of the parliament.

These proposals were made by the Institute of Chartered Accountants of India (ICAI) to the DCA and the parliamentary standing committee. The companies' bill is expected to be tabled in the forthcoming monsoon session of the parliament.

ICAI claims that some of the amendments in the Companies Bill 1997 and Companies (amendments) Bill, 1999 are likely to seriously jeopardise the auditors' independence and the efficacy of audit mechanisms.

ICAI has suggested that the audit committee should work in coordination with the auditors with respect to internal control systems, the scope of audit including auditors' observations and a review of half yearly and annual financial statements before submission to the board. The Companies (second amendment) Bill, 1999 seeks to amend the section 224 of the Companies Act, which states that a chartered accountant can audit upto 20 companies provided that the number of companies having a paid up capital of Rs 25 lakh or more should not be more than 10. The clause seeks to exclude private companies from the ceiling on the number of company audits that a CA or a firm of CAs can accept.

The institute claims that the case for continuation of the ceiling is very relevant and justified because it helps maintain the quality and effectiveness of audit. Moreover, ICAI feels that exclusion of private companies would make the overall ceiling infructous.

The memorandum has also recommended that chartered accountants who are already conducting audit and providing corporate law advisory services should be allowed to issue compliance certificate under section 383A.

ICAI has said in the memorandum that the proposal for rotation of auditors is not justified on merits and is not economical. It could further lead to unhealthy practices, ICAI claims. Instead, the ICAI has called for limiting the managements flexibility to change the auditors, which is in line with the practices followed overseas.

It says that the joint committee of parliament on Companies (amendment bill) 1972 did not approve the concept and dropped the same from the Bill. There is no justification for introduction of the concept now again. The memorandum also calls for modification in the proposed clause to exclude the auditor from the definition of officer since the auditor is an independent person and not an officer of the company.

It is the board of directors or the person authorised by them, who manages the affairs of the company. ICAI has also sought the proposal to treat the auditor as an officer in default should be deleted except for limited purpose of certain specified clauses, since the responsibility and nexus of the auditor with a company limited to auditing and submission of a report thereof.