ICAI council to weigh proposed revamp of audit in sync with global standards, ETCFO

The Institute of Chartered Accountants of India’s (ICAI’s) central council will on September 17 deliberate on a proposed revamp of domestic audit standards in sync with global norms, as it fears the plan could impact small and mid-sized audit firms.

“It is a larger issue and it has to be debated,” ICAI president Ranjeet Kumar Agarwal said on Friday.

The National Financial Reporting Authority (NFRA) has firmed up draft norms to overhaul the extant Standard on Auditing (SA) 600. The revised standard will apply only to listed companies and banks, barring the state-run ones.

ET reported on Thursday that the ICAI had raised its concerns over the NFRA draft norm, which proposes to make the principal auditor of a corporate group responsible for the entire group’s financial statements.

This, ICAI reckons, gives adequate power to the principal auditors-often belonging to large accounting firms-to influence the company management and get the component auditors, who are mainly from small and mid-sized ones, replaced with their own people.

The institute fears it could result in a concentration of audit work with a few large firms. The Indian audit eco-system mostly comprises small and mid-sized firms.

Component auditors usually conduct the audit of subsidiaries of a corporate group.

The draft norms, however, have been endorsed by the office of the Comptroller and Auditor General (CAG) and regulators, such as RBI and Sebi, whose officials are also part of the NFRA board.

People aware of NFRA’s thinking argued that the revamp is not aimed at hurting any firm, small or big.

Rather, it’s necessary to prevent corporate frauds by fostering greater accountability among auditors responsible for the financial statements of companies, based on which millions of retail investors and others put their money in stock markets.

So, greater public interest overrides any other issue, they have said.

Since its roll-out in 2002, the domestic audit standards haven’t been upgraded in accordance with the revamped International Standard on Auditing (ISA) 600.