NFRA board to meet next week: Adoption of new audit rules on agenda

Sources said that the regulator could soon notify the new standards for select entities

The next board meeting of the National Financial Reporting Authority (NFRA) will be held on November 11-12.

 

The meeting assumes significance since NFRA is expected to push for the adoption of the revised International Standards on Auditing (ISA 600) having gone through the process of inviting public comments, according to sources. 

 

Sources said the regulator would make recommendations to the ministry of corporate affairs on the changes in various standards of audit including yhe ISA 600 based on the views of the members. The standards would then be notified by the MCA. 

 

The revised standards have been proposed by NFRA for audits of listed companies and public interest entities, except public sector enterprises, public sector insurance entities, public sector banks and their branches.

 

This would bring a total of 17,450 listed holding companies and their subsidiaries — including unlisted ones — under the ambit of the revised standards, NFRA has said.

 

The last date for public comments ended on October 31.

 

While inviting public comments, NFRA had said that inherent complexity of group structures cannot be handled by the 2002 version of SA 600 currently practised in India. Internationally, these standards were revised in 2009. 

 

“The primary reason for proposing adoption of a revised standard for group audits is to help safeguard public interest and investor protection, and the need for a standards framework that is robust enough to meet the challenges posed by complex financial systems today,” it said. 

 

According to a source, NFRA has taken legal opinion on the matter and is of the view that it can on its own bring out the revised standards for companies which fall under its jurisdiction. 

 

“It is NFRA’s responsibility to update these standards because it has answerability too,” the source said. 

 

The board meeting would be attended by representatives from the Reserve Bank of India (RBI), Securities Exchange Board of India (Sebi), The Institute of Chartered Accountants of India (ICAI), along with those from the Ministry of Corporate Affairs.  

 

Soon after NFRA’s proposal to invite public comments, ICAI called for a pause in the revision process to allow for a comprehensive review.

 

ICAI, according to sources, is concerned that adoption of the ISA 600 will result in concentration of audit work with a few large firms. This may adversely affect small and medium practices in India, which is detrimental to growing economies like India.

 

The revised standards hold that the group auditor is ultimately responsible for audit.

 

The group auditor — under the revised standards — would also evaluate the component auditor’s communications and the adequacy of his work. 

All for the plan

 

> NFRA could notify the new standards soon for select entities

> It would make recommendations to the Ministry of Corporate Affairs on changes in audit standards based on members’ views 

> Revised standards were proposed for audits of listed firms, public interest entities

> Around 17,450 listed companies and their subsidiaries would come under the ambit of the revised standards

> The last date for public comments on the adoption of revised standards ended on October 31