Page 177 - Quick Insights Book 2022

Ann. 14 – Revised Guidelines of Network

2.6 Since it may not be possible to obtain and execute work because one or more firms have left, it can always
work in the name of Network, the lead firm will secure resign from the assignment.
work and distribute tasks amongst the constituent
firms, provided the client has no objection for such an 2.13 Networks can register themselves as AOPs as recognised
arrangement. There are enormous opportunities available under income-tax laws. Networks may form AOP and open
other than audits allotted by authorities, and consultancy bank account in their own name, obtain PAN and GST
works, which can be executed under lead firm concept. registration. Income received by AOP can be distributed
Once work starts to flow in the name of Network itself, as per MOU entered into amongst the member-firms of
lead firm concept can be done away with. Network. IT returns will have to be filed by AOP.
2.14 AOPs can prepare common balance sheet and get it
2.7 The issues that need to be kept in mind is wherever
appointment letter is taken in the name of Lead firm, audited.
other firms, though they may contribute in completing Appendix-3
the assignment, but may not be able to claim credit of (Referred to in para 5.1 of the Guidelines for Networking
experience of task. The situation can be met by entering with Lead Firm concept and forms an integrated part of
into Agreement listing out respective tasks. the Guidelines)
2.8 If one firm in the Network is performing Central Statutory
audit of an entity, another firm in the same Network Naming the Network & Name Approval
cannot be allowed to perform internal/ concurrent/ branch 3.1 The Network can be named as “A B” or “A B & Affiliates”
audit of the same entity. However, both the Firms be OR “A B Network”
allowed simultaneously to perform branch audits or
concurrent audits of different branches if no firm in the 3.2 The member firms of Network can project themselves
Network is central statutory auditor. as “A Member Firm of A B” or “A Member Firm of A B
& Affiliates” or “A Member Firm of A B Network”, in their
2.9 Rotation of audit amongst the constituent firms in a professional stationery and letterheads.
Network is not permitted.
3.3 Following naming provisions as are applicable for
2.10 The provisions of Section 144 of the Companies Act, approval of firm/ trade name under Regulation 190(2)
2013 which restricts auditor from rendering other (ii) will be applicable for approval of Network name:
services to the same client, will apply to all constituent
firms in the Network. • Name approval will be subject to availability of
proposed name.
2.11 Standard on Quality Control (SQC) 1, “Quality Control
for Firms that Perform Audits and Reviews of Historical • Name of Network should resemble name of
Financial Information, and Other Assurance and Related member-firms or a combination of their acronym.
Services Engagements” issued by ICAI is applicable to • Network should not bear the name of god/
firms and networks. goddess/ deity or which has no relationship with

2.12 In a situation where the client or empanelment/ name of member-firms
appointment authority awards work based on the • Descriptive name will not be allowed
combined strength of Network, a subsequent change
in constitution of the Network will not debar rest of the • Names which smack of publicity will not be
constituent firms from executing the work. In a worst allowed.
case scenario, if the Network is unable to discharge the

FORM `AA’
APPLICATION FOR APPROVAL OF NAME OF NETWORK OF FIRMS

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA
[See the relevant Rule of The Guidelines for Networking with Lead Firm
concept amongst the firms registered with The Institute of Chartered Accountants of India]
1. Proposed name of Network 1. __________________________
(in order of preference) 2. __________________________
3. __________________________
4. __________________________

164 Quick Insights on Professional Opportunities for Chartered Accountants