The Companies Act, which was overhauled last year, is likely to see more changes.
With the government seeking comments from various stakeholders on the issue, the role of auditors and independent directors, their responsibilities and working, as laid down in the new act, may be overhauled.
"Though the Companies Act got Parliament approval only last year, certain clauses must be changed at the earliest," a senior government official who did not wish to be identified said.
Under the act, every company — public or private limited — is mandated to get its financial books audited by a statutory chartered accountant and the report is to be filed with the central government and other statutory bodies within six months of any detection of fraud.
However, the demand is that auditors must report frauds committed by employees to companies and board of directors and not to other authorities.
Similarly an independent director, who has not attended a board meeting, cannot be held responsible for a decision, a source said.
"Until the new Companies Act came into force, the statutory auditor's duty ended with reporting to shareholders but now there is an additional reporting requirement, as any fraud detected would now have to be brought to the notice of the government. This needs to be relooked," K Raghu, president, Institute of Chartered Accountants of India (ICAI), told HT.
"The way the Companies Act outlines the role of auditors and independent directors, it is most discouraging for them to come forth, there needs to be a revisit," said Amarjit Chopra, former president, Institute of Chartered Accountants of India.