The Institute of Chartered Accountants of India (ICAI) recently announced some key changes in the empanelment norms for Chartered Accountant (CA) firms by the Office of the Comptroller and Auditor General (C&AG) starting from the empanelment year 2024-25. These changes are likely to impact the allotment of government audit assignments for CA firms going forward.
ICAI Announcement dated 09/11/2023: CAG Empanelment of CA firms/LLPs from 2024-25
Location of Branch Offices to be Considered for Audit Allotment
Until now, the C&AG has been considering the locations of both the head office and branch offices of CA firms while allotting audits of government companies and their units situated across different locations. However, starting 2024-25, the C&AG will only consider those branch offices for audit allotment where at least 50% of the firm’s full-time partners or a minimum of two full-time partners, whichever is lower, are stationed.
Implications for CA Firms
This change in empanelment norms can have significant implications for CA firms looking to undertake government audit assignments from the C&AG:
i) Firms will need to strategically set up branch offices in locations where government companies are headquartered or have major operations. Mere token presence may not suffice anymore.
ii) There will be greater emphasis on stationing full-time dedicated partners at branch offices rather than having visiting partners.
iii) Firms may need to reassess staffing at existing branch offices to meet the enhanced partner presence criteria.
iv) Overall, the new norms will encourage CA firms to strengthen their branch office infrastructure in key locations to remain eligible for C&AG audit allotments.
In light of these changes, CA firms looking to undertake government audits should start planning early and review their branch office presence across India. ICAI’s announcement provides adequate advance notice for firms to make necessary changes in time for the new norms kicking in from 2024-25.