National Financial Reporting Authority (NFRA) Chairperson Ajay Bhushan Pandey has dismissed concerns that revising audit standards for group company audits will lead to audit concentration among a few large firms. Responding to objections raised by the Institute of Chartered Accountants of India (ICAI), Pandey emphasized the need for aligning with global standards to enhance transparency and investor protection.
"Misplaced anticipation of some unknown problem cannot stop us from aligning with global standards and working towards greater transparency and investor protection," Pandey told to a well-known portal.
Addressing Concerns About Audit Concentration
ICAI has expressed reservations about NFRA’s proposed revisions to 40 auditing standards, including SA 600 (group audits) and SA 299 (joint audits). The professional body argues that these changes could marginalize smaller audit firms and create duplication of work. It plans to approach the MCA to voice its concerns.
Under the revised standards, a group auditor must evaluate the adequacy of the work and communication from component auditors. ICAI fears this could lead to group auditors overshadowing component auditors. Pandey, however, refuted these claims, stating, “Nowhere do the standards say that the principal auditor has to do the work of a component auditor. That is why the apprehension of audit concentration is misplaced.”
He added that even if remote examples of concentration arise, they could be addressed through measures such as limiting the number of audits a group auditor can undertake for subsidiaries.
Closing Loopholes to Prevent Corporate Scams
The NFRA chairperson highlighted that recent corporate frauds and failures exposed gaps in existing auditing standards. While these loopholes have been addressed internationally, India has yet to follow suit.
"The proposed revised standards will make it harder for people to suppress such scams for long and help bring them to light at an early stage, thereby protecting the interests of, and enhancing the faith of, foreign and domestic investors, including crores of retail investors, in India’s corporate governance," Pandey said.
Moving Toward Global Standards
Pandey underscored the importance of adopting robust global standards for a "Viksit Bharat." He argued that India could not afford to operate with inferior auditing frameworks when aiming to foster a strong corporate governance ecosystem.
The NFRA board has recommended that the revised standards be implemented from April 1, 2026, pending approval from the MCA. If approved, these changes are expected to bolster investor confidence and promote a more transparent corporate environment in India.
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