Have you ever wonder how auditing firms get audited?

Have you ever wonder how auditing firms get audited?

In any Big Audit Firm, you will note that there are “Audit Partners” and there is a tax and advisory division. The tax and advisory (and all other non-audit lines of service) will be typically formed under a limited liability company (or equivalent). The audit practice will be a “Partnership”.

This comes from age old policy that Lawyers and Accountants/Auditors cannot have limited liability for giving wrong advice/assurance to third parties.

Coming to the current times, most country legislation still require audit firms to be a partnership of the audit partners.

Since it is a partnership, there is no legal requirement for it to be audited. As majority of auditing firms are formed by partnerships.

Hence, it is governed by Indian Partnership Act 1932 which says audit of partnership firms are optional.

The partners are however liable for their personal income tax and may be audited by the tax authority (IRA/IRS) personally.

Large audit firms however do get checked by the licensor of the firm’s brand name. Eg. Individual PWC, KPMG, EY and Deloitte do have to comply with some financial guidelines internally to be able to retain the brand name, and hence these KPIs are monitored. It is not anywhere near a full audit that private companies face. 

In case of mediocre/ Small CA firms, There is also a peer review process in the case of Indian CA firms, where another CA will come to your office and evaluate your auditing procedures and techniques and report to the regulator.

So, an auditing firm in India is subject to a peer review process, which is a quality audit of sorts, and also the regular auditing, which is just like the audit of a corporation.

This Article is written by Yatesh chadda. He can be reached at  yateshchadda@gmail.com

The post Have you ever wonder how auditing firms get audited? appeared first on Studycafe.

from Studycafe https://ift.tt/2HdSv5c