The National Financial Reporting Authority (NFRA) is gearing up for a pivotal board meeting on November 11 and 12, where it is expected to deliberate on revisions to all 35 standards on auditing (SA), including SA600, and examine 16 "consequential" changes to the audit standards recently proposed by the Institute of Chartered Accountants of India (ICAI). This follows NFRA's move to issue draft norms for SA600 - a standard that has sparked ongoing tension with ICAI.
A key topic on the agenda will be the proposed revision of SA600, which mandates that the principal auditor of a corporate group be accountable for the entire group's financial statements. ICAI has voiced opposition to this change, arguing that it could empower large firms, which often serve as principal auditors, to influence management decisions and replace component auditors - typically from smaller firms - thus consolidating control over audit work.
In its last board meeting in August, NFRA proceeded with the draft despite objections from ICAI, who argued that these revisions may not suit India’s audit ecosystem. NFRA, backed by major regulators such as the Reserve Bank of India, SEBI, and the Comptroller and Auditor General, contends that the SA600 revisions are necessary to align India’s auditing practices with global standards.
Another contentious issue in the upcoming meeting is ICAI's recent issuance of standards on quality management (SQMs) on October 14. NFRA has disputed ICAI’s authority to issue these standards independently, asserting that SQMs are linked to audit standards and should require government notification based on NFRA's recommendations. In response, ICAI has maintained that SQMs fall outside NFRA’s purview, as they are not auditing standards per se.
The meeting is anticipated to be a critical juncture in NFRA-ICAI relations, with the outcome likely shaping the future of audit regulation in India.
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