Dear Professional Colleagues,

Please find enclosed a brief note highlighting the key implications of the Draft Empanelment Policy 2026-27, particularly from the perspective of small CA firms. The same is shared for your kind perusal and professional consideration.

With regards,
CA. Vinay Mittal

LInk of Policy 2026-27 onwards
https://mytaxexpert.co.in/uploads/1767835025_CAGPolicy2627.pdf

Link of Policy 2025-26 onwards
https://mytaxexpert.co.in/uploads/1767835033_CAGPolicy2526.pdf 

FAQ
https://www.care.cag.gov.in/Policy/FAQ.pdf 

COMPARATIVE ANALYSIS

C&AG EMPANELMENT POLICY – 2026-27 vs 2025-26

 

1. BASIC STRUCTURE

Particulars	Policy 2025-26	Policy 2026-27	Change Impact
Document length	8 pages	12 pages	Significant expansion
Nature	Final policy	Draft policy	More granular controls
Coverage	Firms/LLPs	Firms/LLPs + Aggregation framework	Wider scope

 

2. FULL-TIME CA PARTNERS – POINTS

Number of Partners Considered

Particular	2025-26	2026-27
Max partners considered	20	20
Full points applicable to	First 5	First 10
Half points applicable to	Remaining 15	Remaining 10

🔴 Change: Larger firms benefit in 2026-27 due to expansion of full-point slab.

 

3. ASSOCIATION (SENIORITY) POINTS

Years of Association	2025-26	2026-27
>5 to 10 years	1 point	0.5 point
>10 years	2 points	1 point

🔴 Change: Association points reduced by 50% in 2026-27.

 

4. FULL-TIME CA EMPLOYEES

Parameter	2025-26	2026-27
Full point slab	First 5 employees	First 10 employees
Half point slab	Next 15	Next 10
Aggregation concept	❌ Not present	✅ Introduced

🟢 Change: Employee strength rewarded more evenly in 2026-27.

 

5. EXPERIENCE OF FIRM / LLP

Parameter	2025-26	2026-27
Points per year	0.5	1.0
Maximum points	10	20

🟢 Change: Experience weight doubled.

 

6. TURNOVER FROM AUDIT SERVICES

Aspect	2025-26	2026-27
Starting slab	No points up to ₹1 Cr	Points start from first slab
Max points	10	10
Partner LLP turnover	❌ Ignored	✅ 25% included

🟢 Change: Small and mid firms gain earlier entry points.

 

7. PEER REVIEW (ICAI)

Parameter	2025-26	2026-27
Maximum points	25	15
Weightage	Very high	Moderated
Aggregation handling	❌	✅ Defined

🔴 Change: Peer Review weight reduced, balanced with AQMM.

 

8. AQMM (NEW EMPHASIS)

Aspect	2025-26	2026-27
AQMM scoring	❌ Not present	✅ Introduced
Max points	—	10

🟢 Major New Feature: Strong push towards audit quality maturity.

 

9. ADDITIONAL QUALIFICATIONS – CA PARTNERS

Parameter	2025-26	2026-27
No. of qualifications counted	1 only	2 allowed
First qualification	1.25	1.00
Second qualification	❌	0.50
ICAI courses	1 point	0.5 / 0.25

🔴 Change: Wider recognition, but lower per-unit weight.

 

10. ADDITIONAL QUALIFICATIONS – CA EMPLOYEES

Aspect	2025-26	2026-27
Qualifications counted	1	2
Points	Higher	Reduced
Max employees	20	20

 

11. PROFESSIONAL MISCONDUCT (ICAI)

Parameter	2025-26	2026-27
Deduction	10%	10%
Impact on aggregation	❌	✅ Partner-wise scaled
Credit for guilty CA	Nil	Nil

🟢 Change: More nuanced treatment in aggregated structures.

 

12. UNSATISFACTORY PERFORMANCE

Year	2025-26	2026-27
1st instance	10% cut	10% cut
2nd instance	❌ 5-year ban	20% cut
3rd instance	❌	No allotment

🔴 Change: Penalty softened but tracked progressively.

 

13. REFUSAL OF AUDIT

Instance	2025-26	2026-27
1st	10% cut	10% cut
2nd	5-year de-empanelment	20% cut
3rd	—	No allotment

🔴 Change: Harsh blanket ban replaced by graded consequences.

 

14. NFRA / REGULATOR ACTION

Aspect	2025-26	2026-27
Advisory / penalty	10% cut	10% cut
Debarment	Disqualification	Disqualification
Court stay effect	❌	✅ Clause suspended

🟢 Change: Judicial relief formally recognised.

 

15. CRIMINAL PROCEEDINGS

Stage	2025-26	2026-27
FIR only	Not defined	Empanelment allowed, no allotment
Chargesheet	No allotment	Not eligible
Conviction	Not empanelled	Not empanelled
Partner exits	❌	✅ Firm revived

🟢 Major clarification introduced.

 

16. AGGREGATION OF FIRMS (NEW CHAPTER)

Feature	2025-26	2026-27
Aggregation	❌	✅ Allowed
Parent–Partner LLP	❌	✅ Defined
Point sharing	❌	✅ ¼th logic
Cooling applicability	❌	✅ Network-wide

🟢 Structural reform introduced.

 

17. MAJOR AUDITS & ROTATION

Parameter	2025-26	2026-27
Maharatna cooling	4 + 5 years	3 + 3 years
Network cooling	❌	✅ Introduced

 

18. INCOME / COMPENSATION THRESHOLD

Year	2025-26	2026-27
FCA metro limit	₹6.00 L	₹9.00 L
ACA metro limit	₹3.60 L	₹5.40 L
Future slabs	❌	₹12L / ₹15L notified

🔴 Change: Clear upward revision & multi-year roadmap.

 

OVERALL POLICY DIRECTION

2025-26 Policy

• Simpler
• Harsh penalties
• Limited quality metrics
• No aggregation concept

2026-27 Policy

• More structured
• Quality-centric (AQMM)
• Aggregation enabled
• Progressive penalties
• Higher compliance thresholds

 

Briefing of New Draft Policy 2026-27 onwards

PAGE 1 – INTRODUCTION & BASIC FRAMEWORK

1. Title

Draft Policy of Empanelment of CA Firms/LLPs and Selection of Auditors

 

2. Statutory Power

Sections 139(5) and 139(7) of the Companies Act, 2013 empower the Comptroller & Auditor General of India (C&AG) to appoint auditors of:

• Government Companies
• Deemed Government Companies

Auditors are empanelled to comply with these statutory requirements.

 

3. Who Can Apply

• Chartered Accountant Firms and LLPs in India
• Must have at least one full-time FCA partner or FCA sole proprietor
• Application to be made online

 

4. Empanelment Criteria

• Criteria finalized after considering suggestions from:
• ICAI
• Other stakeholders
• All empanelled firms/LLPs are awarded points.
• Circumstances where:
• Firms are not empanelled, or
• Empanelled but not considered for audit
  are specified later.

 

5. Quantitative Parameters – Full-Time CA Partners (Max 20)

(a) FCA Partners / Sole Proprietor

• First 10: 3 points each
• Next 10: half points

(b) ACA Partners

• First 10: 2 points each
• Next 10: half points

Aggregation Rule

If only Parent LLP applies:

• Parent LLP partners: full/half points
• Partner LLP partners: ¼ points

 

6. Association of CA with Firm

(From formation or joining date, whichever is later)

• Above 5 years up to 10 years: 0.5 point
• Above 10 years: 1 point

Aggregation rules same as above.

 

PAGE 2 – CA EMPLOYEES, EXPERIENCE, TURNOVER

7. Full-Time CA Employees (Max 20)

• First 10: 1 point each
• Next 10: 0.5 point each

Aggregation:

• Partner LLP employees: ¼ point

 

8. Experience of Firm/LLP

• 1 point per completed calendar year
• Maximum 20 points
• Counted from:
• Date of constitution with one FCA, OR
• Joining of longest-associated CA

Aggregation:

• Parent LLP: full points
• Partner LLP: 0.25 point per year

 

9. Turnover from Audit Services Only

• Consultancy excluded
• Maximum 10 points
• Slab-wise points
• If only Parent LLP applies, 25% of Partner LLP turnover included

 

10. Qualitative Parameters Introduced

• Peer Review
• AQMM
• Audit Experience

 

PAGE 3 – QUALIFICATIONS OF CA PARTNERS

11. Peer Review (ICAI)

• Maximum 15 points
• Only Parent LLP certificate considered if Partner LLP does not apply

 

12. AQMM

• Maximum 10 points

 

13. Additional Qualifications – CA Partners (Max 25 Points)

Professional Qualifications

• DISA, CISA, CPA, CIA, CFE, DIRM, DFI
• First qualification: 1 point
• Second qualification: 0.5 point
• Max 20 partners

ICAI Certification Courses

• First: 0.5 point
• Second: 0.25 point

 

PAGE 4 – CA EMPLOYEE QUALIFICATIONS

14. Additional Qualifications – CA Employees (Max 20 Points)

Professional Qualifications

• First: 0.8 point
• Second: 0.4 point

ICAI Courses

• First: 0.4 point
• Second: 0.2 point

 

PAGE 5 – PROFESSIONAL TRACK RECORD (NEGATIVE MARKING)

15. ICAI Professional Misconduct

• 10% score reduction per guilty CA
• No credit for that CA
• Aggregation:
• Parent LLP partner: 10%
• Partner LLP partner: 2.5%

 

16. Poor Audit Performance

If grading <50% consistently:

• 1st year: 10% reduction
• 2nd year: 20% reduction
• 3rd year: No allotment

 

17. Refusal of Audit

• 1st refusal: 10% reduction
• 2nd refusal: 20% reduction
• 3rd refusal: No allotment next year

 

PAGE 6 – REGULATORY ACTIONS

18. Quality Review Board Advisory

• 10% reduction

 

19. NFRA Action

• Advisory / caution / monetary penalty: 10% reduction
• Debarment: Not empanelled
• Court stay or vacation: Clause suspended

 

20. Debarment by Any Regulator

• No empanelment for debarment period

 

PAGE 7 – CRIMINAL PROCEEDINGS

21. FIR Without Chargesheet

• Empanelment allowed
• No audit allotment

22. Chargesheet Filed

• Not eligible for empanelment

23. Conviction

• Not eligible

24. Judicial Relief

• Eligible if stayed / quashed / acquitted

25. Partner Leaves Firm

• Firm becomes eligible

Aggregation rules detailed and applied.

 

PAGE 8 – GIFT CITY, MERGER, AGGREGATION

26. Gift City LLP

• Empanelment protected subject to single application

27. Merger

• Points after one year
• Earlier association benefit after five years (proposed change: after one year)

28. Aggregation

• Parent LLP can include one Partner LLP
• Both cannot apply separately

 

PAGE 9 – ALLOTMENT OF AUDITS

29. Audit Fee up to ₹5 Lakh

• Software-based selection
• Based on points, vacancy, location

30. Major Audits (Above ₹5 Lakh)

Eligibility:

• 6 full-time CAs
• 10-year firm existence
• Partner stability
• CISA or DISA mandatory
• 5-year CAG audit experience

 

PAGE 10 – FULL-TIME CA DEFINITION (INCOME TEST)

31. Income Criteria (City-wise)

Specified slabs for:

• FCA
• ACA
• Years 2026-27, 2027-28, 2028-29

Income includes:

• Profit share
• Remuneration
• Interest on capital

 

32. Minimum Income Share

• % share depends on number of partners

 

PAGE 11 – CLARIFICATIONS & TABLES

33. Exclusivity Requirement

• Must be exclusively associated during preceding calendar year

34. Turnover Slab Table

• Points based on audit turnover and city

35. Peer Review Points Table

• Based on certificate date

36. AQMM Points Table

 

PAGE 12 – AUDIT EXPERIENCE POINTS

37. Statutory Audit – Corporate

• Points based on turnover slabs

38. Statutory Audit – Branch

• Separate slabs

39. Internal Audit

• Points for auditee turnover above ₹40 crore

40. Government Schemes & Autonomous Bodies

• Fixed points per assignment

41. UDIN Basis

• Points calculated using UDINs for specified years
  
  

  Disclaimer
  This document is prepared solely for general professional information and discussion purposes. It does not constitute legal, tax, or professional advice, nor should it be relied upon as a substitute for independent professional judgment. While due care has been taken in preparing the contents, the author and the organization disclaim any responsibility or liability for any action taken based on this note. Readers are advised to verify the applicable provisions independently from official sources before acting upon the information.