ICAI to knock on MCA door against proposed audit standard revision

The NFRA, after its board meet, has suggested revisions to 40 Standards on Auditing

The Institute of Chartered Accountants of India (ICAI) will raise concerns with the Ministry of Corporate Affairs (MCA) over revisions to two audit standards, sources in the institute told Business Standard.

 

After its 18th board meeting on Tuesday, the National Financial Regulatory Authority (NFRA) recommended revisions to 40 Standards on Auditing (SA), including SA 600 and SA 299, which deal with group and joint audits, respectively.

 

The ICAI had voiced its disagreement with these two standards during the NFRA board meeting. According to ICAI sources, aligning SA 600 and SA 299 with global norms would be detrimental to Indian firms since these revisions do not take domestic context into account.

 

In response to NFRA’s suggestion that auditors have used current standards to conceal audit lapses, the ICAI sources said any fraud reflects the failure of the individual conducting the audit, not the standard itself.

 

“The NFRA has used the present SA 600 to penalise the auditors responsible for lapses in the recent case of Cafe Coffee Day. This means there is nothing wrong with the standards. It is not a toothless tiger. For a few aberrations, we cannot change the whole standards. There is a reason why we have not matched these two standards to international norms,” an ICAI source said.

 

The CA institute also said international audit standards were set by the International Federation of Accountants (IFAC), with input from the International Auditing and Assurance Standards Board (IAASB) and the Forum of Firms, which is dominated by the Big Four. “Due to conflicts of interest, the two bodies have been carved out of IFAC. But these standards were notified much before this separation,” the ICAI source added, stressing that the revised standards would serve the interest of big audit firms since they would have the capacity to conduct large-scale group audits.

 

“We are a growing economy and we should fall for the practices in the western world to our own detriment. We have much less fraud compared to the developed economy. Systems have become robust since the Satyam scam,” the ICAI source said.

 

The revisions to SA 600 are proposed to be applicable only to public interest entities, excluding public-sector banks, PSUs, and public-sector insurers, and their branches. This change would affect 17,450 listed holding companies and their subsidiaries, including unlisted ones, bringing them under the scope of the revised standards. Group auditor of these companies under revised standards would also evaluate the component auditor’s communications and the adequacy of their work.

 

Following NFRA’s recommendations, the MCA has to approve and notify the new standards. The NFRA has suggested making the revised standards effective from April 1, 2026, pending government approval.