{"id":9975,"date":"2026-01-19T18:38:41","date_gmt":"2026-01-19T18:38:41","guid":{"rendered":"https:\/\/www.caindelhiindia.com\/blog\/?p=9975"},"modified":"2026-01-19T18:45:02","modified_gmt":"2026-01-19T18:45:02","slug":"draft-cag-empanelment-policy-2026-27-issues-affecting-ca-firm","status":"publish","type":"post","link":"https:\/\/www.caindelhiindia.com\/blog\/draft-cag-empanelment-policy-2026-27-issues-affecting-ca-firm\/","title":{"rendered":"Draft C&#038;AG Empanelment Policy 2026\u201327 Issues Affect CA Firm"},"content":{"rendered":"<h2><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-5613\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2023\/04\/Audits-Eligibility.jpeg\" alt=\"Audits Eligibility\" width=\"1187\" height=\"790\" \/><\/h2>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69da6d26c11fb\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69da6d26c11fb\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.caindelhiindia.com\/blog\/draft-cag-empanelment-policy-2026-27-issues-affecting-ca-firm\/#Draft_C_AG_Empanelment_Policy_2026%E2%80%9327_%E2%80%93_Issues_Affecting_Small_Medium_CA_Firms_Suggested_Policy_Interventions\" title=\"Draft C&amp;AG Empanelment Policy 2026\u201327 \u2013 Issues Affecting Small &amp; Medium CA Firms &amp; Suggested Policy Interventions\">Draft C&amp;AG Empanelment Policy 2026\u201327 \u2013 Issues Affecting Small &amp; Medium CA Firms &amp; Suggested Policy Interventions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.caindelhiindia.com\/blog\/draft-cag-empanelment-policy-2026-27-issues-affecting-ca-firm\/#Specific_issue_on_Draft_C_AG_Empanelment_Policy_2026%E2%80%9327_Policy_Provisions\" title=\"Specific issue on Draft C&amp;AG Empanelment Policy 2026\u201327 \u00a0Policy Provisions\">Specific issue on Draft C&amp;AG Empanelment Policy 2026\u201327 \u00a0Policy Provisions<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.caindelhiindia.com\/blog\/draft-cag-empanelment-policy-2026-27-issues-affecting-ca-firm\/#Weightage_architecture_and_experience_recognition\" title=\"Weightage architecture and experience recognition\">Weightage architecture and experience recognition<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.caindelhiindia.com\/blog\/draft-cag-empanelment-policy-2026-27-issues-affecting-ca-firm\/#Partner%E2%80%91income_thresholds_used_as_eligibility_screens\" title=\"Partner\u2011income thresholds used as eligibility screens\">Partner\u2011income thresholds used as eligibility screens<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.caindelhiindia.com\/blog\/draft-cag-empanelment-policy-2026-27-issues-affecting-ca-firm\/#Audit_fee_fixation_and_sustainability\" title=\"Audit fee fixation and sustainability\">Audit fee fixation and sustainability<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.caindelhiindia.com\/blog\/draft-cag-empanelment-policy-2026-27-issues-affecting-ca-firm\/#Recognition_of_all_audits_allotted_via_C_AG\" title=\"Recognition of all audits allotted via C&amp;AG\">Recognition of all audits allotted via C&amp;AG<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.caindelhiindia.com\/blog\/draft-cag-empanelment-policy-2026-27-issues-affecting-ca-firm\/#Prospective_application_and_transition\" title=\"Prospective application and transition\">Prospective application and transition<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.caindelhiindia.com\/blog\/draft-cag-empanelment-policy-2026-27-issues-affecting-ca-firm\/#Inter%E2%80%91Ministerial_support_to_remove_structural_frictions_Tax_Policy\" title=\"Inter\u2011Ministerial support to remove structural frictions (Tax Policy)\">Inter\u2011Ministerial support to remove structural frictions (Tax Policy)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.caindelhiindia.com\/blog\/draft-cag-empanelment-policy-2026-27-issues-affecting-ca-firm\/#Use_of_MCA_data_to_design_location%E2%80%91sensitive_benchmarks\" title=\"Use of MCA data to design location\u2011sensitive benchmarks\">Use of MCA data to design location\u2011sensitive benchmarks<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.caindelhiindia.com\/blog\/draft-cag-empanelment-policy-2026-27-issues-affecting-ca-firm\/#Key_suggestions_from_before_finalizing_the_Draft_C_AG_Empanelment_Policy_2026%E2%80%9327\" title=\"Key suggestions from before finalizing the Draft C&amp;AG Empanelment Policy 2026\u201327.\">Key suggestions from before finalizing the Draft C&amp;AG Empanelment Policy 2026\u201327.<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Draft_C_AG_Empanelment_Policy_2026%E2%80%9327_%E2%80%93_Issues_Affecting_Small_Medium_CA_Firms_Suggested_Policy_Interventions\"><\/span><span style=\"color: #000080;\"><em>Draft C&amp;AG Empanelment Policy 2026\u201327 \u2013 Issues Affecting Small &amp; Medium CA Firms &amp; Suggested Policy Interventions<\/em><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>While the objective of the <em>Draft Comptroller and Auditor General of India Empanelment Policy 2026\u201327 \u00a0<\/em>to strengthen audit quality, accountability, and governance\u2014is fully appreciated, certain provisions, if implemented in their present form, are likely to result in unintended, inequitable, and structural exclusion of competent SMPs, due to factors largely beyond their control. This policy affected to Small and Medium Chartered Accountant Firms, particularly those operating in non-metro cities, small towns, and non-corporate locations<\/p>\n<p>Unequal professional ecosystems across locations : Corporate and PSU opportunities are concentrated in metros and business hubs, while smaller cities have limited auditee density. When uniform turnover\/income\u2011linked measures are applied nationwide, firms in low\u2011opportunity regions face a systemic handicap unrelated to competence. The Ministry of Corporate Affairs\u2019 RoC\u2011wise company master data (publicly available for analysis) evidences significant area\u2011wise variations and can be used to calibrate benchmarks.<\/p>\n<p>Principle of equity compare like with like : A location\u2011agnostic scoring approach effectively compares firms exposed to very different opportunity sets, undermining natural justice. A location\u2011sensitive calibration using MCA company density (or PSU presence) can resolve this without diluting quality expectations.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Specific_issue_on_Draft_C_AG_Empanelment_Policy_2026%E2%80%9327_Policy_Provisions\"><\/span><span style=\"color: #000080;\"><strong>Specific issue on <em>Draft C&amp;AG Empanelment Policy 2026\u201327 \u00a0<\/em>Policy Provisions<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"Weightage_architecture_and_experience_recognition\"><\/span><span style=\"color: #000080;\"><strong>Weightage architecture and experience recognition<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The C&amp;AG policy uses a points system combining quantitative\/qualitative parameters (partners, association, employees, experience, turnover, peer review, Audit Quality Maturity Model, additional qualifications) for empanelment and for allotment (with stricter criteria for major audits). This is appropriate in principle, but the mix of parameters can unintentionally favor scale over partner\u2011led merit in regions with few auditees. Over successive empanelment cycles, weightage for partner-related parameters has been progressively reduced, including number of partners, FCA qualification, and length and continuity of association. Simultaneously, the weightage for parameters such as aggregate turnover, income benchmarks, aggregation\/network strength, and manpower size has increased.<\/p>\n<p>The <em>Draft Comptroller and Auditor General of India Empanelment Policy 2026\u201327 adds<\/em>\/expands elements such as Audit Quality Maturity Model points and detailed skill\u2011upgrade credits\u2014welcome quality leversbut they should not crowd out long association of partners and continuity, which drive judgment quality in public sector audits.<\/p>\n<p><span style=\"color: #000080;\"><strong>Requests to change in <em>Draft C&amp;AG Empanelment Policy 2026\u201327 \u00a0<\/em><\/strong><\/span><\/p>\n<ul>\n<li>Restore meaningful weight to number of partners, FCA status, and length of association, ensuring these outweigh brute size proxies.<\/li>\n<li>Cap the turnover contribution to a moderate ceiling to prevent \u201cscale\u2011only\u201d leapfrogging in low\u2011opportunity geographies.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Partner%E2%80%91income_thresholds_used_as_eligibility_screens\"><\/span><span style=\"color: #000080;\"><strong>Partner\u2011income thresholds used as eligibility screens<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The current <em>C&amp;AG Empanelment Policy for FY <\/em>2025\u201326 uses minimum partner compensation thresholds (e.g., for FT FCA partners: \u20b96.00 lakh in select metros vs \u20b93.60 lakh elsewhere) and minimum percentage shares of total firm compensation to validate full\u2011time status. In practice, these thresholds can disqualify otherwise capable SMPs when PSU\/corporate audit fees in their regions are structurally low.<\/p>\n<p><strong><span style=\"color: #000080;\">Requests to change in <\/span><em><span style=\"color: #000080;\">Draft C&amp;AG Empanelment Policy 2026\u201327<\/span> \u00a0<\/em><\/strong><\/p>\n<ul>\n<li>Treat partner income as non\u2011disqualifying or indicative only (not hard cut\u2011offs), at least for non\u2011metro stations.<\/li>\n<li>If retained, link thresholds to a location coefficient derived from MCA company density\/PSU presence.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Audit_fee_fixation_and_sustainability\"><\/span><span style=\"color: #000080;\"><strong>Audit fee fixation and sustainability<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>While Comptroller and Auditor General of India appoints auditors u\/s 139(5) &amp; 139(7) of the Companies Act, 2013, audit fees are fixed by the company under Section 142 (C&amp;AG\u2019s appointment terms reiterate this and require a memorandum of fee). Audit fees should be benchmarked considering PSU turnover, Nature and complexity of operations, Risk profile, Number of audit locations, Audit man-days &amp; Audit Quality Maturity Model and compliance requirements. Hence, firms have limited control over consideration despite statutory responsibilities and evolving quality demands.<\/p>\n<p><span style=\"color: #000080;\"><strong>Requests to change in <em>Draft C&amp;AG Empanelment Policy 2026\u201327 \u00a0<\/em><\/strong><\/span><\/p>\n<ul>\n<li>Publish a rational fee framework (non\u2011binding benchmarks) factoring: turnover, complexity\/risk, multi\u2011location spread, audit man\u2011days, and compliance overheads (including Audit Quality Maturity Model), with INR 15 lakh as a reference minimum for major audits (subject to risk\/size uplift).<\/li>\n<li>Encourage auditees to adopt these benchmarks, and require disclosure of the basis for deviations in the fee memorandum.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Recognition_of_all_audits_allotted_via_C_AG\"><\/span><span style=\"color: #000080;\"><strong>Recognition of all audits allotted via C&amp;AG<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Where audits are allotted\/assigned through the C&amp;AG process, the resultant experience should always carry a scoring value consistent with the statutory risk and accountability borne by the auditor. (Currently, scoring depends on stipulated categories\/thresholds; some assignments can fall outside the \u201ccountable\u201d buckets.)<\/p>\n<p><span style=\"color: #000080;\"><strong>Requests to change in <em>Draft C&amp;AG Empanelment Policy 2026\u201327 \u00a0<\/em><\/strong><\/span><\/p>\n<p>Treat all Comptroller and Auditor General of India allotted statutory audits as experience\u2011earning (with appropriate caps to avoid gaming), so SMPs are not denied progression pathways for reasons beyond their control.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Prospective_application_and_transition\"><\/span><span style=\"color: #000080;\"><strong>Prospective application and transition<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The General Instructions already require data \u201cas on 1 January\u201d and note that adverse changes after the cut\u2011off that reduce rank can be considered, which effectively creates the perception of retroactive impact. A clear prospective\u2011only change management policy with reasonable transition periods would uphold legitimate expectations.<\/p>\n<p><span style=\"color: #000080;\"><strong>Requests to change in <em>Draft C&amp;AG Empanelment Policy 2026\u201327 \u00a0<\/em><\/strong><\/span><\/p>\n<p>Codify that new criteria\/thresholds apply prospectively, with phased transition for SMPs to adapt (e.g., two cycles).<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Inter%E2%80%91Ministerial_support_to_remove_structural_frictions_Tax_Policy\"><\/span><span style=\"color: #000080;\"><strong>Inter\u2011Ministerial support to remove structural frictions (Tax Policy)<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>Section 40(b) places a ceiling on deductible partner remuneration. The Finance Bill 2024 doubled the limits w.e.f. AY 2025\u201126 (e.g., \u20b93,00,000 or 90% of first \u20b96 lakh of book profit; 60% thereafter), but structural frictions remain for MSME professional firms.<\/p>\n<p>Partnership firms\/LLPs continue to face a flat 30% tax rate (plus surcharge\/cess), whereas domestic companies can opt for 22% under Section 115BAA (effective ~25.17%) or 25%\/30% standard rates, creating a parity gap for MSME partnerships.<\/p>\n<p><span style=\"color: #000080;\"><strong>Requests to change in <em>Draft C&amp;AG Empanelment Policy 2026\u201327 &amp; <\/em>to be forwarded to MoF\/GoI:<\/strong><\/span><\/p>\n<ul>\n<li>Re\u2011examine Section 40(b) for professional MSME firms to avoid de facto multiple\u2011layer taxation on the same earnings.<\/li>\n<li>Consider rate alignment (or reliefs) for partnership firms\/LLPs closer to concessional company rates to ensure a level playing field.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Use_of_MCA_data_to_design_location%E2%80%91sensitive_benchmarks\"><\/span><span style=\"color: #000080;\"><strong>Use of MCA data to design location\u2011sensitive benchmarks<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>MCA maintains company master data (and RoC\u2011wise datasets on the Open Government Data platform). This resource can objectively compute corporate density indices and PSU presence, enabling policy to normalize thresholds\/weights across stations.\u00a0Direct a joint Comptroller and Auditor General of India MCA working group to build a Location Coefficient (per district\/RoC) and apply it to turnover\/income thresholds and fee benchmarks.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Key_suggestions_from_before_finalizing_the_Draft_C_AG_Empanelment_Policy_2026%E2%80%9327\"><\/span><span style=\"color: #000080;\"><strong>Key suggestions from before finalizing the <em>Draft C&amp;AG <\/em>Empanelment Policy 2026\u201327.<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li>Restore meaningful weightage for number of partners (FCA\/ACA), long association, and firm continuity; cap the score share of turnover.<\/li>\n<li>Introduce location\u2011sensitive coefficients using MCA RoC\u2011wise data\/PSU presence.<\/li>\n<li>Abolish retrospective\/back\u2011dated application; adopt prospective rollout with transition of at least one full cycle.<\/li>\n<li>Treat partner income thresholds as indicative, not disqualifying\u2014especially for non\u2011metro locations.<\/li>\n<li>Issue a rational audit fee framework with a reference of INR 15 lakh minimum for major audits, calibrated by risk\/size\/man\u2011days\/Audit Quality Maturity Model.<\/li>\n<li>Ensure all Comptroller and Auditor General of India allotted audits carry experience\/scoring value.<\/li>\n<li>Provide transition support for existing SMPs (e.g., phased targets, capacity\u2011building credits)<\/li>\n<li>Recommend Section 40(b) rationalization and explore tax\u2011rate parity for MSME partnerships vis\u2011\u00e0\u2011vis companies (22% u\/s 115BAA).<\/li>\n<li>A data\u2011driven, inclusive, experience\u2011sensitive, and prospective framework coordinated with MCA and MoF will improve audit quality while ensuring SMPs from non\u2011metro locations are not structurally excluded. while finalizing the Empanelment Policy 2026\u201327.<\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Draft C&amp;AG Empanelment Policy 2026\u201327 \u2013 Issues Affecting Small &amp; Medium CA Firms &amp; Suggested Policy Interventions While the objective of the Draft Comptroller and Auditor General of India Empanelment Policy 2026\u201327 \u00a0to strengthen audit quality, accountability, and governance\u2014is fully appreciated, certain provisions, if implemented in their present form, are likely to result in unintended, &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[98],"tags":[1271],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/9975"}],"collection":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/comments?post=9975"}],"version-history":[{"count":3,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/9975\/revisions"}],"predecessor-version":[{"id":9977,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/9975\/revisions\/9977"}],"wp:attachment":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/media?parent=9975"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/categories?post=9975"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/tags?post=9975"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}