Upgrading India's auditing standards will boost credibility: NFRA chief

Aligning India's auditing with global standards will help boost investors' confidence, attract more funds and ensure greater credibility to the financial data, National Financial Reporting Authority's chief Ajay Bhushan Prasad Pandey has said.

He also asserted that the country cannot have "inferior standards" when the pursuit is to become a "Viksit Bharat".

NFRA was constituted under the company's law in October 2018. The watchdog has passed more than 80 orders.

In a recent interview, Pandey told PTI that there are certain gaps in existing auditing standards and that internationally, many standards were updated to address loopholes that had led to various scams.

 

"In India, we are yet to update the standards in various areas. In the last 20 years, many of these standards are there in most parts of the world. We want to become Viksit Bharat, and our standards should also be aligned with global standards. We cannot have inferior standards," the NFRA Chairperson said.

According to him, the NFRA board approved the changes to certain standards after detailed discussions with the RBI (Reserve Bank of India), Sebi (Securities and Exchange Board of India) and CAG (Comptroller and Auditor General).

Chartered accountants' apex body ICAI has raised concerns about changes to some of the standards.

"We reviewed the standards and there are about 40 auditing standards. We found that there are 2 or 3 standards like SA 600 and SA 299 which were completely different from the international standards. There were also other standards where there were a lot of variances.

"For several months, we had detailed discussions with the RBI, Sebi and CAG as all three are represented on our board. I was very glad to see that they were firmly of the view that we must align our standards with the global standards," Pandey said.

SA 600 pertains to the audit of group companies and three other auditing standards while SA 299 relates to joint liability of auditors.

"If we are going global, a lot of funds have to come and being aligned with international standards will help in attracting the funds... when you align with global standards, there will be more investors' confidence and greater credibility to the financial data," Pandey said.

While talking about the regulator, he said it is working on a five-pronged approach that includes developing the ecosystem comprising auditors and other stakeholders.

Other elements of the approach include disciplinary orders, inspections of audit firms, aligning auditing and accounting standards with the global standards to fix the gaps, and using technology and building capabilities of the regulator.

On whether NFRA needs more powers, Pandey said there should not be any regulatory overburden and that it will make the best use of the mandates already given by Parliament under the company law.

"If there are some questions of some legal interpretations, those are ongoing processes and many of them come through court orders. I believe that at this point in time, I see no limitation as such and we should not be in a situation where there is a regulatory overburden. We should avoid that," he added.