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Stop the present Tendering system for Audit of Government Agencies and formulate suitable guidelines

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To,                                                                                                                   

The President,

The Institute of Chartered Accountants of India,

NEW DELHI

Sub: Require Immediate Attention: Unethical/Unjustifiable Practice adopted by CA Firms while Applying for Tenders

Dear Sir,

We had an experience of recent few years, wherein Government Agencies are inviting tenders from practicing CA Firms for their statutory and/or internal Audit.

 

It has been observed that some members are quoting abnormally & unrealistically low fee while responding to tenders (for the sake of getting the work), which gives birth to a suspicion over the seriousness and quality of their delivery.  This also opens up the possibility of them colluding with the agency whose projects are being audited.

 

Further, these tenders also require applicants to pay earnest money or security deposit along with the application. It is to be noted that a chartered accountant is a professional rendering specialized services (not dealing in a commodity which can be treated as per its quality/quantity) and not quoting or bidding for any property/asset etc. which require him to pay anything at the end of the day.

 

Due to these tendering process, CA firms started the cut throat competition and criminally cohobate the authorities to put the abnormal conditions so that majority may go out for auditing the institutions, which is not at all desirable for maintaining the dignity of our noble profession.

 

Further, media (electronic and print) are regularly highlighting the matters wherein Government Audits are accepted at very low fee by few CA firms and accordingly questioning about the quality of audit and conspiracy involved with the concerned agencies. This should not at all be applied to the entire CA fraternity, as only few members are engaged in these ill practices.

 

Considering the overall impact of this tendering system, we request our Hon’ble Institute to please look into this serious issue immediately and formulate suitable guidelines under the Chartered Accountants Act/Regulations and also to include ethical considerations while preparing the Draft Guidelines to streamline the process of response to various tenders, advertisement, circulars, or enquiries by chartered accountants and firms, these may include-

 

-          Members to respond to “tenders” only in case there is no condition of depositing earnest money/security etc. for making application.

 

-          Members should respond only in case the scope of work is indicated clearly because it has been observed that most of the tenders are not clear as to the scope of work to be performed in the proposed engagement which at times is a potential source of dispute between the parties involved.

 

-          Member should respond to “tenders” only in case of conditions specified in the tender are generic in nature.  Many a times, authorities do have restrictive clauses like turnover of the firm, number of partners, number of chartered accountants in the firm, previous audit experience of the same entity etc. in their tenders which allow only certain specified firms to apply for such tenders, which is not a healthy practice.

 

-          Whenever any tender invites chartered accountants to respond which may involves violation of the Code of Ethics, a member should not respond but also report the same to the Institute for taking further necessary action.

 

-          If there is a huge (abnormal) difference between the lowest quote received against a tender (on which the tender is ultimately allotted) and the next lowest quote, then PEER REVIEW of the said assignment and/or concerned chartered accountants/CA firm thereof must be ordered.

 

-          The re-commendatory scale of fees to be used as a benchmark by members while quoting for tenders be incorporated in the guidelines.

 

-          A cost-sheet must be maintained by members of the Institute responding to tenders and accepting professional work, incorporating the details of cost, personnel, hours, etc., which the Institute will call for and refer to for various purposes. Our members must keep these decisions in mind while responding to a tender.

 

-          Suitable regulations to be incorporated to ensure implementation of Quality Control and Engagement Standards and Code of Ethics in conduct of various assignments. 

 

ICAI Ethical Standard Board should develop suitable guidelines to curb all the ills of this practice and while framing guidelines, the following may be considered:

-          Wherever any tender violates or compels a chartered accountants to violate the Code of Ethics, chartered accountant should not only abstain from doing so but should also report the same to the Institute for taking further necessary action.

 

-          Appropriate rules may be devised to ensure implementation of engagement and Standard on Quality Control and Code of Ethics in conduct of various assignments.

 

-          While formulating the approved guidelines, the recommendatory scale of fees may also be kept in view and it should be emphasized that the chartered accountants and firms thereof must to follow the recommendatory scale of fees while quoting for various tenders, advertisements and circulars, etc.

 

-          Ethical Standards Board should propose guidelines with a view to streamline the prevalent practice while responding to tenders etc. and enhance the image of the profession.

 

With a view to control the quality of audit of social schemes and government projects, ICAI should also discuss the issues with CAG and request to formulate following things-

 

-          Government agencies may be asked to stop tender-based appointment of auditors,

 

-          CAG in consultation with ICAI to prepare a district-wise panel of eligible auditing firms,

 

-          CAG should fix the audit fee scheme wise (considering the level of operations and scope of audit work),

 

-          Government Agencies to select auditors from panel at pre-determined fees.

 

Hence, we sincerely request you to please immediately take the note of this practice and took proper actions on time.

 

Thanking You,

CA. Ashish Garg

B.com, FCA, ACS, ACMA, LL.B., DIRM, DISA

Membership No 508397

ATN & Co

Chartered Accountants

Jai Balaji Bhawan, Bramha Road, AMBIKAPUR

PIN 497 001 (Chhattisgarh)

Mobile: 98060 69796

 



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