Insolvency regulator proposes audit of Insolvency Resolution Process Cost
The Insolvency and Bankruptcy Board of India (IBBI) now proposes an audit of the Insolvency Resolution Process Cost (IRPC).
In a discussion paper released recently, the insolvency regulator has said that the existing Corporate Insolvency Resolution Process (CIRP) Regulations provide what constitutes Insolvency Resolution Process Cost, but they do not necessitate an audit of these costs.
It says that considering the significant bearing these costs can have on the overall resolution process, it becomes crucial to assure their veracity. “Therefore, it is proposed to introduce an audit requirement for CIRPs involving CDs of a certain asset size within the CIRP Regulations,” reads the discussion paper.
It says that this additional measure is intended to bolster financial accountability and enhance confidence among all stakeholders involved in such CIRPs.
The discussion paper also proposes the inclusion of Audit Cost within the IRPC.
“The expenses incurred towards the audit of Insolvency Resolution Process Cost (IRPC) shall be included as part of the IRPC. The Resolution Professional (RP) shall ensure that the audit cost is appropriately budgeted and included in the overall IRPC,” it says.
The Insolvency Resolution Process Cost comprises various costs, including the remuneration of the Resolution Professional (RP), expenses incurred by the RP in running the business of the CD as a going concern, and costs specified under Regulation 31 of the CIRP Regulations, among others.
The discussion paper further proposes that the resolution professional should get the audit of IRPC conducted after finalisation of the cost of IRPC for the financial year.
Auditor Eligibility and Disqualification
The audit of Insolvency Resolution Process Cost has to be conducted by a Chartered Accountant who is also recognized as an insolvency professional. Any Chartered Accountant who is disqualified under Section 141 of the Companies Act, 2013, from being appointed as an auditor of a company, will also be deemed to be disqualified from conducting an audit of IRPC.
In addition, any Chartered Accountant who has been involved in the same CIRP as an Insolvency Professional, a consultant, an advisor, or in any other capacity, shall also be disqualified from conducting the audit of IRPC to avoid any conflict of interest.
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