Page 13 - Banking Finance June 2019

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Govt reports pharma ex- Govt plans more curbs on audit firms
More restrictions may be imposed on audit firms on accepting non-audit as-
ports up 11% to $19.2 bn
signments from clients. This initiative has been taken to
Pharmaceutical export of the coun-
develop the quality of statutory audit. "The ministry of
try increased
corporate affairs and the National Financial Reporting
by 11 per cent
Authority have been assessing how the quality of audit
to $19.2 billion
can be further improved and whether the list of non-
in 2018-19,
audit services that auditors are barred from accepting
due to the
should be widened in order to prevent a conflict of in-
higher demand in regions such as
terest," corporate affairs secretary Injeti Srinivas said.
North America and Europe, accord-
ing to the information from Com- The purpose of the move is to ensure that any pecuniary relationship on ac-
merce Ministry. count of offering non-audit services do not compromise auditors in giving a fair
picture of the financial health of the audited company.
In 2017-18, the pharma exports stood
at $17.3 billion and $16.7 billion in the "We need to see if the already strict provisions should be further tightened,"
previous fiscal. The data reveals that said Srinivas, while indicating that a ban on auditors accepting non-audit ser-
North America constitutes about 30 vices cannot be ruled out. Presently, the Companies Act, 2013, does not allows
per cent of Indian pharma exports, statutory auditors from directly or indirectly offering eight specified services,
followed by Africa and the European inclusive of internal audit and actuarial and investment banking services, to their
Union with 19 per cent and 16 per clients. Auditors are refrained from offering such services to the audited entity's
cent share, respectively. parent or subsidiary. This would also empower the government to disallow any
In accordance to the experts, the other services in the future.
Chinese market is also gradually ex- However, other lucrative services are there that are outside the purview of this
panding and the government is work- list, such as tax audit, secretarial services, transfer pricing-related services, and
ing to push India's exports there as it mergers and acquisitions advisory that statutory auditors are free to offer to
holds huge potential. The other im- their clients.
portant destinations include South
Traditionally, audit firms have other companies in their network to offer non-
Africa, Russia, Nigeria, Brazil and
audit services. However, according to industry executives, having a network
Germany, where growth is seen to be
partner firm offering non-audit services could pose conflict of interest to the
increasing. The sector accounted for
audit firm, as profits are shared among partners across the network.
about 6 per cent of the country's to-
tal exports of $331 billion in 2018-19. "If one firm in the general network is offering statutory audit, it is unethical for
any other firm in that network to accept non-audit consultancy of any type other
It is one of the top five sectors in
than tax audit and transfer pricing audit (from the same client)," said Amarjit
terms of the exports segment. Ge-
Chopra, former president of accounting rule maker Institute of Chartered Ac-
neric drugs with 75 per cent market
share form the largest segment of countants of India (ICAI).
the Indian pharmaceutical sector. 20
62 AGMs promoted as DGMs by SEBI
per cent of global generic medicines
SEBI has recently promoted 62 of its Assistant General Managers (AGMs) as
in terms of volume is supplied by In-
Deputy General Managers (DGMs) in the latest
dia making the country the largest
provider of generic medicines all drive. SEBI has embarked on a major promotional
over the globe. drive this year after employee outrage regarding
its promotion policy.
More than 55 per cent of the country's
exports go to highly regulated markets. Grade 'C' AGMs have been promoted from gen-
Higher growth in outbound shipments eral stream, research, legal, information technol-
helps create employment opportuni- ogy and engineering as DGMs. SEBI, which recently purchased a new property
ties, earn foreign exchange and en- worth Rs 1,000 crore, is also focusing on enhancing its staff strength with new
hance economic activities. recruitments.

BANKING FINANCE | JUNE | 2019 | 13