To get selected for audit of public sector undertakings (PSUs) or statutory corporations, CA firm with basic eligibility has to first empanel with comptroller and auditor general (CAG) of India.
CA firms or LLPs in India can apply for empanelment with the office of CAG for allotment of PSU audits if they have at least one full time FCA as a partner. If the CA firm is a proprietorship concern then the sole proprietor must be a full time FCA to get eligible.
After empanelment with CAG, CA firm will be eligible for PSU or statutory corporation audits. State governments are also asking CAG empanelment letter for various audit works. Without CAG empanelment, the Chartered Accountant firm will not be eligible for State government audits and assignments.
However, it’s not that all empaneled firms will be allotted PSU or statutory corporation audits. These allotments are done on the basis of ranking or points.
Points allotted to CA firms for appointment as statutory auditor of PSUs whose audit fees are up to Rs 150000
As discussed above, points are allotted based on the experience of CA firm, number of partners and their association with the firm, number of chartered accountant employees. After allotting points, selection is made by correlating the point score of each CA firm.
Below is a table showing points allotted to CA firms for appointment as statutory auditor where audit fees are up to Rs 150000.
|Experience of the firm||0.5 point for every calendar year -Maximum 15.
(Counted from the date of constitution of the firm with one full time FCA or date of joining of the firm by the existing partner having the longest association with the firm whichever is later.)
|Full Time FCA Partners||5 points each for first 5 partners and 2.5 points each from 6th partner onwards.|
|Full Time ACA Partners||3 points each for first 5 partners (including FCA partners) and 1.5 points each from 6th partner onwards.|
|Points for long association with the same firm||5 points for each partner above 25 years.|
|4 points for each partner above 20 years.|
|3 points for each partner above 15 years.|
|2 points for each partner above 10 years.|
|1 point for each partner below 10 Years but above 5 Years.|
|Full Time CA Employees||1 point each for first 20 C.A Employees-Maximum 20 points|
|CISA/ISA Qualified Partners||2 points each for three partners. -maximum 6 points|
|CISA/ISA Qualified Employees||1 point each – Maximum 3 points for 3 employees.|
Points allotted to CA firms for appointment as statutory auditor of PSUs whose audit fees are more than Rs 150000
CAG has fixed criteria for short listing eligible empaneled CA firms for allotment of major audits (of PSUs whose audit fees are more than Rs 150000) are as under;
- The chartered accountant firm should have at least six chartered accountants out of which 5 chartered accountants should be full time partners and one could be a full time paid chartered accountant employee.
- At least one partner of the CA firm should have an association of 10 years or more with the CA firm and at least 3 partners of the CA firm should have an association of 5 years or more with the firm and the remaining two should have an association of 1 year or more with the CA firm.
- The CA firm itself should have been in existence of 10 years or more.
Allotment for these major audits are not based on the size, number of CA employees, number of partners and their association with CA firm. Selection is on the basis of service tax paid, capability of handling big audits, past performance, location of the firm’s branch offices, sectoral experience etc.
However for selection of statutory auditor of PSUs (in both the above cases) full time partner does not include a person who is;
- a partner in other firms
- employed part time or full time elsewhere, practising in their own name or engaged in practice otherwise or engaged in any other activity which would be deemed to be in practice under section 2(2) of the Chartered Accountants Act, 1949
- Partner whose total compensation from the firm is less than the prescribed limit as given in the policy of empanelment and/or not commensurate with the total compensation (share of profit, remuneration and interest on capital etc) paid to the partners during the financial year.
Total Compensation for the above purpose includes sum total of share of profit, remuneration and interest on capital. Total compensation restriction is prescribed or specified by CAG based on the location of head office.
If the head office of the firm is located in Delhi, Mumbai, Chennai, Kolkata, Bangalore or Hyderabad then total compensation to a ACA partner from the firm should not be below Rs 180000 per year (Rs 15000 per month). Similarly, for FCA partners this limit is fixed to Rs 300000 per year (Rs 25000 per month).
If the head office is in other locations i.e. not in Delhi, Mumbai, Chennai, Kolkata, Bangalore or Hyderabad then total compensation from the firm to a ACA partner should not be below Rs 120000 per year (Rs 10000 per month). Similarly for FCA partners this limit is fixed to Rs 180000 per year (Rs 15000 per month).
If a partner whose total compensation from the firm is less than following limit then that partner will not be included;
|Firms having more than 14 partners||1%|
|Firms having 10 to 14 partners||3%|
|Firms having 5 to 9 partners||5%|
|Firms having less than 5 partners||8%|
Sole proprietors or Partners or chartered accountant employees will get points if they were exclusively associated with the CA firm throughout the calendar year immediately preceding the year of empanelment.
In case of merger, the partners of the merging firm will be assigned points after 1 year of merger and points for partner’s association to be given after 5 years from the date of merger.