NFRA has proposed changes where a Group Auditor would hold ultimate responsibility for the audit of group financial statements. Credit: TippaPatt/Shutterstock.

The Institute of Chartered Accountants of India (ICAI) has called for a halt in the ongoing revision of auditing standards by the National Financial Reporting Authority (NFRA).  

ICAI’s request follows the recent release of revised Standards on Auditing 600 (SA 600) by NFRA for public consultation, which aligns with International Standards on Auditing (ISA 600). 

NFRA, the auditing and accounting supervision authority in India, has proposed changes where a Group Auditor would hold ultimate responsibility for the audit of group financial statements.  

This includes evaluating the communications of component auditors and the adequacy of their work.  

In a statement, ICAI, as reported by the Business Standard, said: “The ICAI Council, in its meeting held on 17 September 2024, expressed its view that while the current SA 600 has been effective and has stood the test of time, there is room for further review and strengthening to better serve the public interest.” 

ICAI, during its council meeting on 17 September, tasked the Auditing and Assurance Standards Board (AASB) with reviewing the standard and commencing the public exposure process, which is ICAI’s usual practice. 

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It expressed surprise at NFRA’s unexpected release of the revised guidelines, noting that it typically sets up a group to examine issues and releases an exposure draft for public comments.  

After incorporating feedback and making necessary amendments, the AASB submits a report to the Council, which then forwards recommendations to NFRA. 

“This process could not be complied with in this instance as NFRA has already issued the Exposure Draft for public comments, even while the Council was discussing this matter for review,” the institute said. 

The international standards in question were last revised in 2009. 

ICAI has raised concerns that the updated standards could adversely affect the viability of small audit firms and contends that the international definition of a component auditor is not applicable in the Indian context.  

Conversely, NFRA argues that the revision is crucial for safeguarding public interest and investor protection, adding that the audit of approximately 98% of companies is likely to remain unaffected by the changes.  

This implies minimal impact on the volume of audits conducted by small and medium-sized firms. 

The Reserve Bank of India and the Securities and Exchange Board of India have both indicated their preliminary support for the need to update the existing standards.