The National Financial Reporting Authority (NFRA) has proposed revisions to the Standards on Auditing 600 (SA), aligning them with the International Standards on Auditing (ISA 600).
This move, aimed at addressing the “severely deficient quality and serious lack of due diligence” in group audits, is now open for public consultation.
The revisions are intended for the audits of listed companies and public interest entities, excluding certain public sector organisations.
The updated standards would extend to a number of entities, with 17,540 listed holding companies and their subsidiaries, both listed and unlisted, falling under the revised SA 600’s scope.
The NFRA’s decision to revise the standards comes in response to the challenges posed by complex group structures, which the 2002 version of SA 600 currently in use in India is deemed inadequate to manage.
These standards were internationally updated back in 2009.
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By GlobalDataThe revised SA 600 addresses the considerations necessary for auditing group financial statements.
Under the new standards, group auditors will be required to assess the communications and work adequacy of component auditors.
This revision is part of the NFRA’s efforts to address the Institute of Chartered Accountants of India’s (ICAI) concerns about audit concentration among a few large firms.
The NFRA noted that the entities under its jurisdiction, along with their subsidiaries, represent about 1.8% of all active companies in India.
The Business Standard, citing undisclosed sources, reported that the ICAI has expressed concerns that adopting ISA 600 may lead to an undesirable concentration of audit work with larger firms.
ICAI stated that: “in respect of why ISA 600 is not adopted in India is that the Standard requires sharing of work papers between auditors, and sharing of work papers is not permitted in Chartered Accountants Act 1949.”
Meanwhile, both the Reserve Bank of India and the Securities and Exchange Board of India have indicated their preliminary support for updating the existing standards.
The Comptroller and Auditor General of India has recommended stakeholder consultation and a phased approach to transitioning to these revised standards.
