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The rising number of scandals at alarming rate has put a question mark on the relevance and significance of prevailing auditing practices. Moreover, alternatives to current auditing practices are also being sought. The present paper makes an attempt to critically examine whether it has actually become the need of the hour to dual the audit effort that is getting the book of accounts of the client audited by two independent auditors separately without having whiff of one another's work or strengthening the present auditing system by improving the statutory audit, internal audit and peer review.
Key Words: Dual Audit, Statutory Audit, System of Internal Control, Internal Audit, Joint Audit and Peer Review.
The existing auditing system involves the critical scrutiny of books of accounts, data, statements and records etc of an enterprise by a competent and independent chartered accountant known as statutory or external auditor for the production of an annual audit report depicting the truth and fairness of the statements and records examined by him. The statutory auditor has to take help of the work done by internal auditor to accomplish his task. But, significant increase in the number of auditing scandals has made the present system of auditing questionable. Hence, one of the alternatives under consideration is dual audit. Dual audit, where two sets of auditors examine the accounts simultaneously. Every listed company's accounts would be examined by two sets of auditors simultaneously culminating in two separate reports for the benefit of shareholders and other stakeholders interested in accounts.
Dual statutory audit that is two sets of auditors simultaneously bestowing their attention and energy on the annual accounts of a company to be placed before the annual general meeting (AGM) in a spirit of healthy competition that is admittedly being considered an antidote to laxity. In this article, the issue examined is the relative effectiveness of dual audit in terms of current auditing system prevailing in the country constituting external audit and internal audit along with joint audit and peer review carried out in accordance with the demand of the particular enterprise as governed by the statute. Murlidharan reflects the weaknesses in the present system of audit including internal audit and it has to be supported by an efficient system of external audit that is dual audit in accordance with him. But, this paper emphasises on the need to overcome these limitations rather to look for alternatives like dual audit as it can also face the same limitations.
After this introductory Section, Section II states the research methodology. Section III discusses the need and relevance of system of internal control while need of strengthening internal audit has been mentioned in Section IV. Section V examines the weaknesses in the current statutory audit practices. Section VI depicts the concept of joint audit. The requirement to make peer review more effective has been assessed in Section VII. Section VIII evaluates whether the concept of dual audit is the possible solution. Finally, Section IX provides the conclusions and recommendations.
II Research Methodology
This paper is based upon the study titled "Perceptions of Auditors on Various Aspects of Statutory Audit" carried out with the help of structured questionnaire. Questionnaire was served to two-hundred members of Institute of Chartered Accountants of India (ICAI) in all. Out of two-hundred questionnaires, one hundred and sixty-eight questionnaires are returned and three questionnaires have not been included in the analysis because of incomplete responses. Thus, analysis has been made on the basis of views of one hundred and sixty-five participant auditors that constitute 82.5 percent response.
The study considers responses of chartered accountants who are practicing auditors only or may have experience of both auditing profession and industry. All of the respondents are experienced in statutory audit along with other forms of audit. They belong to different age groups and have audited several forms of organizations.
Information has been collected personally, through internet and by post. Analysis of the responses has been made on the basis of simple aggregative and percentages with the help of Microsoft excel worksheet.
III Need and Relevance of System of Internal control
Spicer and Pegler, a famous authority on auditing literature defines system of internal control as: "Internal control is best regarded as a whole system of controls, financial or otherwise, established by management in conduct of a business including internal check and internal audit and other forms of controls."
Existence of internal control system in any entity provides good evidence that aims of internal control system like adherence to policies, safeguarding of assets, prevention of error and fraud, reliability and completeness of financial information might be achieved but they provide satisfaction and not assurance of fulfillment of control objectives. There are some possible limitations of the internal control system. For example, all areas may not be covered by system of internal control because of cost considerations, it is not applicable for transactions of unusual nature, it can not stand against deliberate circumvention of control process installed by management, false manipulation of transactions by entity, breach of control by staff collusion or controls may become obsolete in change scenario. Recognising this vital fact, statutory auditor should proceed to evaluate internal control system as he can not escape his liability accusing weaknesses in internal control afterwards if some error or fraud is detected. In spite of the aforesaid limitations of the system of internal control, the role and importance of system of internal control can not be neglected.
Gupta and Murthy (2012) have made an attempt to know how far sound system of internal control is relevant in present context and possibility of improvement in law is required if any. The analysis indicates that nearly, nine-tenths (89.11 percent) of the auditors participated in the study were of the opinion that sound internal control system plays a vital role in minimizing the work of an auditor.
Further, an attempt has been made by Gupta and Murthy (2012) to check the satisfaction level of participant auditors with regard to internal control system maintained by the entities visited by them. The analysis reveals that more than seven-tenths (72.12 percent) of the respondents found internal control system maintained by the entities visited by them as moderately satisfactory only. Thus, aforesaid discussion reveals that maintaining sound internal control system in a business entity is a necessity though it has not been found very satisfactory in Indian enterprises. Therefore, efforts are inevitable on the part of authorities to compel specific enterprises at least, to install sound system of internal control.
IV Need to Strengthen Internal Audit
Internal audit constitutes an important element of internal control system. The Preface to the Standard and Guidance Notes on audit has defined internal audit as: "An independent management system which involves a critical appraisal of the entity. The objective of the internal audit is to suggest improvement to the functions of entity, strengthen the overall governance mechanism of the entity, strategic risk management and internal control system." Thus, internal audit not only encompasses checking matters relating to finance but also reviews or undertakes the critical appraisal of the policies of the company. It helps in improving organizational effectiveness.
Audit of accounts by internal auditor is not compulsory in India. However, complexity and increasing size of corporations has drastically increased the role of internal auditor. Now, internal audit has assumed special significance in India with the introduction of Manufacturing and Other Companies (Auditor's Report) Order. It has been superceded by Company's (Auditor's Report) Order, 2003. According to this Order, in case of specific companies, statutory auditor is required to report whether internal audit system commensurate with nature and size of the business of the company or not.
Views of respondents have been analysed by Gupta and Murthy (2012) to know whether audit of systems and control by an internal auditor should be made compulsory in India at least for large organisations like in other countries. Around three-fourths (73.33 percent) of the participants strongly support that audit of systems and control by an internal auditor should be made compulsory in India at least for large organisations. On aggregate basis, nearly five-sixths (95.76 percent) of the respondents are in favour of making internal audit of systems and control compulsory in our country as well. This strong opinion is formed due to significance of system of internal control of which internal audit is an integral part and no statutory audit can be completed successfully without relying on internal audit especially in large business houses.
V External/Statutory Audit and its Loopholes
An audit that is compulsory for an entity to be conducted due to statute or law is termed as statutory audit. Statutory audit can be characterized as independent financial audit or external audit also. As auditor engaged to conduct audit is required to be independent of management and this type of audit must be complete in all respects and scope of his work can not be curtailed or determined by management. Specific law governs rules regarding his competence and professional qualification, appointment and removal, rights and duties, liabilities, presentation of audit report and standards of audit performance. The object of statutory audit is to protect the interest of owners and other parties related to the enterprise. Statutory auditor is an outsider and independent person appointed mostly by owners and in some cases by government. Statutory audit may be either periodical or continuous in nature depends upon its need and suitability. The statutory auditor has to rely on the work performed by other auditors in certain circumstances. Cases of joint audit, branch audit and internal audit provide examples where the auditor has to liaise with other auditors.
Is statutory Auditor Really Independent?
The Institute of Chartered Accountants of India in its publication of Statements on Auditing and Assurance Standards: Basic Principles Governing an Audit (AAS 1) [i] or SA 200 describes audit as "The independent examination of financial information of any entity, whether profit oriented or not, and irrespective of its size or legal form, when such examination is conducted with a view to expressing an opinion thereon." Gupta (2011) tested the opinions of the respondents on the basis of this definition given in AAS 1 by ICAI in terms of their satisfaction level with reasons and adjustments if any. Results showed that discontentment amongst the auditors with regard to definition of audit as per AAS 1 is because of two reasons mainly: (i) examination of non-financial information has not been given place in it and (ii) independent examination has lost its significance in present time. Independent examination for a statutory or external auditor has become difficult is reflected in the following views of the respondents as found in their responses:
Our appointment should not be assigned by the company in which we are doing audit." Moreover, fee for audit should also not be paid by the client as it affects the independence of the auditor.
2. Now a days, in this commercial world, auditors have lost their independence. Nobody wants to loose their client, they have to find mid-way to retain the client and remain with the law.
3. Major share of assesses is in unorganized sector where independence of auditor hardly exists.
4. In most of the cases, independence of the auditor does not exist.
Therefore, effective steps are inevitable to check the independence of auditor while conducting audit. It is, of course, essential that an auditor preserve his objectivity and integrity from his own viewpoint, commonly called "independence in fact", it is also important that auditor appear independent to all users of the information he provides. This latter concept is key ingredient to the value of audit function, since users of audit reports must be able to rely on the independent auditor.
VI Concept of Joint Audit
In case of joint audit, more than one statutory auditor is appointed by an entity as it may be difficult for one auditor to complete the audit in prescribed time due to large size and voluminous transactions. In such a case, the statutory auditors have to plan division of work amongst themselves. The work may be divided according to units of operation or areas of checking. As per Auditing and Assurance Standard twelve (AAS 12) [ii] , "Responsibility of Joint Auditors", work may be divided branch or regional office wise, plant wise, assets/liabilities wise or income/expenditure wise. Every auditor has to be responsible for the work done by him and it is the professional obligation for each of the joint auditors to bring to the notice of other auditors any matter significant to the truth and fairness of the financial information. Thus, joint auditors enjoy similar status in the statutory audit only their workload is divided because of voluminous transactions.
As joint audit has become a necessity in large business houses, views of respondents have been checked to determine best criterion of division of work amongst joint auditors. It is found that division of work amongst joint auditors should be done branch or regional office wise in accordance with nearly three-fourths (71.51 percent) of the respondents.
Joint audits are used internationally, including in India, Denmark, Germany, Switzerland and the UK. Joint Audit addresses two underlying principles of audit quality: Auditor's independence and competence. It enables a benchmarking of audit approaches and affords audit committees the opportunity to pick and choose the best local firms from within two globle networks. Audit committees and investors have additional assurance that the audit opinion with which they are presented is complete. A joint audit allows rotation of audit firms, and retains knowledge and understanding of group operations in a way that minimizes the disruptions caused when single audit firm is changed. The rotation of audit firms is equally likely to mitigate the risk of overfamiliarity. Two firms can also stand stronger together against aggressive accounting treatments. In this way, joint audit effectively becomes guardian for audit quality. The benchmarking which takes place between the two firms raises the level of service quality.
VII Peer Review: Should Adopt Some Disciplinary Mechanism?
Peer review means when one chartered accountant (reviewer) examines the other chartered accountant (audit firm) to judge quality of attestation work performed by them. The main objective of peer review is to insure that in carrying out professional attestation services like audit, the members of Institute of Chartered Accountants of India comply with the technical standards laid down by the institution. Peer review is not done for services other than attestation services rendered by the audit firm like management consultancy and others. Reviewer engaged by PRB carries out the peer review of practicing audit firm would be concentrating on adequacy of laid down procedures and not on the opinion arrived at by the practice unit (audit firm under review).
On the basis of report of the reviewer or any submission or representation attached with the report, PRB can recommend to any or more or all the partners of the audit firm reviewed for compliance of specific technical standard. After a specific period of time if PRB is satisfied with the performance of audit firm reviewed with regard to recommendation earlier made to it, it may issue the peer review certificate to the audit firm.
The ultimate objective of peer review is to enhance the quality of professional work and it has no relationship with disciplinary mechanism of members of ICAI/chartered accountants. As peer review is a self-regulatory mechanism and is the answer of the profession to the society and stakeholders at large that profession is conscious of its responsibility and shall strive its best to insure that highest standards are observed by the practicing chartered accountants. An attempt has been made to determine how far PRB has been successful in assuring society and stakeholders at large that auditing profession is conscious of its responsibilities and highest standards are observed by practicing chartered accountants from the point of view of auditors participated in the study. Table 1 indicates the responses of participants on aforesaid aspect as under:
Peer Review Board
Number of Respondents
1. Strongly Agree
5. Strongly Disagree
Table 1 reveals that nearly, two-thirds (64.24 percent) of the participants admit that PRB has been successful in assuring society and stakeholders at large that auditing profession is conscious of its responsibility and highest standards are observed by practicing chartered accountants. Even, around one-fifth (18.79 percent) of the respondents strongly acknowledge this. However, more than one-eighth (13.34 percent) of participants disagree that PRB has been successful in achieving its objective.
In accordance with majority of respondents, PRB has succeeded because review is done in prescribed and standardized manner and if some audit firm is not able to prove itself, specific instructions are made to improve. After a specific period of time if PRB is satisfied with the performance of audit firm reviewed with regard to recommendation earlier made to it, it may issue the peer review certificate to the audit firm that helps in attaining its goal. Views of respondents have further been evaluated to judge whether objective of PRB to enhance quality of professional work will be better obtained if it adopts some disciplinary mechanism. Table 2 presents the responses of participant auditors in this regard as follows:
Disciplinary Mechanism and PRB
Number of Respondents
1. Strongly Agree
5. Strongly Disagree
It is shown by Table 2 that exactly four-fifths of the chartered accountants participated in this analysis are of the opinion that objective of PRB to enhance quality of professional work will be better obtained if it adopts some disciplinary mechanism. Even, nearly, one-third (30.91 percent) of the participants strongly acknowledge this opinion. And none of the respondent strongly opposes the view that PRB should adopt some disciplinary mechanism or regulatory action to achieve its objective of quality enhancement of professional work more effectively.
Thus, adoption of disciplinary mechanism by PRB is highly welcomed by majority of respondents. It is because when a sort of fear will be there in the minds of the auditors; compliance of technical standards, quality of reporting and other important matters would be strictly taken care of from the very beginning by the audit firms. Hence, objective of PRB will be better achieved.
VIII Could Dual Audit be the Possible Solution
The best solution would be to delink appointment of auditors from the management of the auditee which indeed is incestuous to put it mildly. The system of appointment of auditors by a dispassionate agency a la the RBI in the case of public sector banks and the CAG in the case of public sector companies would be the ideal, but till this issue is hammered out, Murlidharan argued that dual audit may be a second solution. Rotation of auditors coupled with decoupling the auditors from the management of the companies whose accounts are audited then appears to be the more pragmatic solution to the problem of auditors' credibility.
S. Murlidharan highlights the positive as well as negative aspects of dual audit and still favours dual audit in the end. He compares dual audit or simultaneous audit with joint audit, peer review and rotation of auditors as follows:
Dual audit or Simultaneous audit vs. Joint Audit
In joint audit, the two auditors work in tandem and submit either a separate or joint report as deemed necessary. But what is being proposed is simultaneous audit by two sets of auditors not working in tandem but in splendid isolation from each other in a spirit of healthy competition to give the best to the shareholders. If this would increase the expenses on audit, so be it. And if the presence of two sets of auditors could make life more difficult for accounting staff of a company and its management, once again so be it because at the end of the day the shareholders would be better equipped to take a call on the quality of the accounts. As with users of credit rating, the users of accounts would be doubly reassured if both are in complete or substantial agreement on vital issues. And if they are at loggerheads on substantive issues, they would be put on alert. Either way they stand to benefit.
Dual Audit vs. Peer Review
Dual audit, any day, would be much better than the much vaunted peer review which is nothing but an ex post facto examination of the auditor's work with the benefit of hindsight. Peer review has always invited sneers except when one reads Arthur Hailey's hugely appreciated and widely read fiction The Final Diagnosis. The peer review mechanism worked by the ICAI has turned out to be more a review of the auditor's infrastructure and capabilities rather than of his work. In any case, aggressive and intrusive peer review should not be expected when one is restrained by the sobering realisation that at the end of the day we all live in glass houses and should not throw stone at each other. In the event, dual audit, where two sets of auditors examine the accounts simultaneously without having a whiff of each other's conclusions, is the best in the circumstances.
Dual audit is much better than the ex-post facto peer review, which to many people appears to be an inane exercise given the fact that the reviewing auditor normally does not like to step on the toes of his more active rival. When two auditors examine the accounts simultaneously, there is nothing perfunctory or even remotely farcical about the duplication. On the contrary, the duplication would make for a healthy duel between the two with both being conscious of the possibility of being projected in a bad light should the other's work turn out to be more reliable and conscientious. As Mr. Salman Khurshid, puts it, dual audit involves a fine-toothcomb approach that would be brought to bear on their work for the fear of being hauled over the coals for being remiss even while the other auditor was more painstaking.
Dual Audit vs. Rotation of Auditors
Rotation of auditors is doing the rounds and is being trotted as a panacea now that L'affaire Satyam has raised a big question mark over the effectiveness of the extant system of audit. Rotation coupled with appointment by a dispassionate agency with no axe to grind, a la the C&AG in the context of audit of public sector companies, would be what the doctor has ordered. More ideal but less realistic would be what the research publications do - blind referencing of the papers submitted to the reviewers lest they get influenced and biased, which would be the case if they come to know the identity of the paper writers. But then it is simply not possible to hide the identity of the company whose accounts are in front of the auditor
Minuses of Dual Audit
The criticism against dual audit is that it would be a costly duplication of time, efforts and money with the audit enterprise subjected to audit overkill what with so many auditors snooping around if one also reckons the looming presence of the internal auditor, especially when he is an outsider rather than a pliable insider.
But this is an objection more on grounds of inconvenience and cost as per supporters of dual audit. A deeper reflection would show that both can be taken in stride given the innate merit of the scheme that is bound to goad the two auditors into a healthy dual if not range them as raving adversaries a la gladiators in a ring. Experience shows that it is competition that brings out the best in human beings whatever the field is. One may be tempted to ask that if competition is so good why not more than two auditors. But given the nature of audit work and its disruption potential that can throw the normal functioning of the audit enterprise pell-mell, two would do.
Possibility of Colusion in Dual Audit
Collusion is anti-competition. Collusion in the matter of price fixation or cartelisation is the bane of competition. As alluded earlier, professionals too collude with each other chastened by the sobering thought that tomorrow I might be at the receiving end so much so that peer review becomes just a farcical sideshow with results as predictable as in a match-fixing. Dual audit too could come to a naught if the two auditors exchange notes away from the public glare and produce independent reports sans independence. Collusion amongst Goliaths cannot be ruled out. How about pitting a David against Goliath? In other words, let us start with dual audit with one auditor being big and the other small. NOT CLEAR HOW IT WILL HELP when big influences the small.
Of course, there would always be a fear of the two auditors working together surreptitiously and putting on the façade of submitting independent reports. Incidentally, such duality would double the audit work coming their way and hence could be the primary reason why they may support this move though some of them might be distinctly uncomfortable at the prospect of a rival snapping at their heels. Incidentally too, those concerned with the world of accounting could be supportive of dual audit at a more philosophical level - the core of accounting is duality with every debit entry having a matching credit entry and vice-versa - may be with a wry smile.
Dual audit may not be the best solution to the problem of crisis of confidence in the institution of audit and in the auditors what with auditors increasingly coming to be perceived as enjoying a cosy relationship with the promoters of the companies they are the auditors of, engendering a further cynical perception as a corollary that in such a milieu audit is bound to be done in a hand washing spirit, glossing over even serious mistakes.
Murlidharan argues that dual audit far from being a duplication of efforts, energy and expenses would be a sort of unconscious and unobtrusive internal check - a concept whose benefits a student of audit is asked to imbibe as his first lesson. When the work is divided in such a way that there is automatic overseeing of work of one by another, the possibilities of fraud and errors diminish. So would when two auditors are simultaneously at work with each displaying a heightened sense of responsibility lest he is projected in a bad light if not for anything else. Experience reveals that it is necessary to associate at least two reputed firms in the audit work, supported by highly interactive deliberations by all concerned. Overall, it is the company management and the associated directors who should imbibe this spirit of making auditing an integral part of successful corporate governance.
Critical Examination of the Views in Favour of Dual Audit
Of course, dual audit will strengthen the checking of the client's accounts; the views of the supporters of dual audit have been critically examined on the following grounds:
Firstly, concept of dual audit is not very clear if checked in the light of the definition of dual audit as defined in Encyclopedia" a dual audit is performed by two independent auditors issuing their own separate reports, which are then used by another auditor that ultimately reports on the entity as a whole." So, it is needed to be predetermined that it should be called dual audit or triple audit.
Secondly, dual audit of course be an expensive exercise in terms of cost, time and effort.
Thirdly, possibility of collusion between so called two independent auditors performing dual audit is not denied even by supporters of dual audit.
Fourthly, dual audit is not going to precise the existing system of auditing, e.g., system of internal control will still be required.
Fifthly, dual audit is not comparable with internal check as internal checking is the simultaneous checking of a transaction as soon as it takes place with the help of division of work but not by duplication of effort. Rather, internal check is better reflected by joint audit. Furthermore, if the size of the firm is too big to be handled by one single auditor, in dual audit, would not the two independent auditors require the joint auditors separately?
Sixthly, dual audit should not be associated with double entry system of accounting. Double entry system is based on the fact that in every transaction, two parties or accounts are involved, one is receiver and another is giver and hence, their accounts are credited or debited accordingly. But, dual audit is like debiting or crediting a similar entry twice.
Seventhly, if so called independent, statutory auditors involve in the dual audit are of contradictory views, then, would it be easy or difficult to handle the situation?
Eighthly, concept of dual audit will increase the demand of qualified chartered accountants that would almost be doubled, how to fulfill that all of the sudden?
Ninthly, auditors involved in dual audit will not become independent of the company for which they would be working, so, how the problem is going to be solved?
Lastly, making existing audit system involving system of internal control, statutory audit and peer review more strengthened and effective appears to be a better solution in light of the views of the respondents in stead of doubling the audit effort by making the external audit dual.
Therefore, need of the hour is to identify the problem and that is of independent status of the statutory auditor. As long as auditors are appointed and remunerated by the enterprises directly, it is not going to be solved either the audit is doubled or tripled.
IX Conclusion and Recommendations
Rising number of scandals have made the authorities to find out alternatives for better corporate governance. Dual audit is one amongst such alternatives where two separate independent statutory auditors are appointed to facilitate the audit task and produce two separate audit reports without having knowledge of one another's work. Though, it is the fact that dual audit will increase the creditability of the financial statements and S Murlidharan has made a very good attempt to prove that dual audit is a better option to be made applicable until the best option of appointing the auditors with the help of a dispassionate agency is hammered out. But, the main problem is of independent status of the auditor and that is not going to be achieved unless and until the appointment and payment of remuneration of the auditors is made independent of the company for which he is working. Therefore, if dual audit is made applicable and enterprise remains the appointing and remunerating authority in case of both the so called independent auditors, no improvement in the situation can be contemplated. As they would be independent of one another but not from the company who is appointing and remunerating them. Furthermore, possibility of collusion between two of them is not even denied by supporters of dual audit. On the other hand, the dual audit is expensive in terms of time, cost and effort is also accepted by its supporters. Hence, the need of the hour is to improve the existing audit environment where it is said auditors are appointed by the shareholders of the company in its AGM but they are subservient of the company's management actually.
Furthermore, the comparison between joint audit and dual audit is baseless from the very beginning as joint audit is needed in case of large companies where number of transactions is too large to be handled by one single auditor. When two auditors would be working separately for a similar enterprise, wouldn't they be requiring help of joint auditors in the audit of big companies especially and moreover separately? It would also lead to increase in the demand of auditors, which would virtually be doubled. As number of public companies to be audited by a statutory auditor is fixed. Therefore, ICAI will be required to change the present law or to decline the standards for an individual to become a qualified chartered accountant.
Similarly, will dual audit eliminate the need of peer review? As independent status of the auditor is an essential for this profession, peer review is also an essential. Though, it can be made more effective by introducing some disciplinary mechanism as acknowledged by the participant auditors themselves in majority.
Sound system of internal control in an enterprise is the backbone of statutory audit. Henceforth, steps are inevitable to make installation of system of internal control not only a necessity but also efficacy of internal control should be insured as a result of the views obtained from the participant auditors. Therefore, number of plans being prepared to strengthen the internal audit in the Indian enterprises should not remain in black and white rather immediate course of action is desirable.
Thus, in stead of making external audit dual, need of the hour is to remove the weaknesses in the present audit system. Some of the operational suggestions are enlisted in this regard as follows:
Appointment procedure of auditors should be adopted that can facilitate better independence. For example, such an independent private agency can be established by government that makes the appointments of auditors itself on behalf of entities in various organisations where audit is a legal requirement. Standards may also be required to be prescribed in such appointment.
Remuneration of statutory auditors should also be fixed by an independent private agency created by government and payment should be made in such a manner that enterprise is involved indirectly only. It would help in preventing any possibility of collusion between client and auditor.
Immediate steps to make internal audit strengthen in Indian enterprises are inevitable, i.e., making internal audit independent of management; identifying it as a distinct profession; compulsion of internal audit in defined size and type of organizations and other options can be given a serious thought and decisions can be taken accordingly.
Peer review should be made more effective by including some disciplinary mechanism in it.
Rotation of statutory auditors after a specific period of time is also a plausible solution, i.e., in New Company Bill, 2011, a provision for rotation of auditors after every five years is already there.
Efforts should be made to check the assesses in unorganized sector.
Liabilities of auditors who do not present a fair and true picture must be made more stringent.