 "The National Financial Reporting Authority (NFRA) will soon seek comments from Big Five audit companies and share its second draft inspection report assessing whether they have incorporated the suggestions it made in the last financial year, accordin")
NFRA Chairperson Ajay Bhushan Prasad Pandey on Tuesday said the regulator's efforts are to incorporate best global standards, which are required for the country to have big homegrown accounting and auditing firms.
Amid NFRA and chartered accountants' apex body ICAI having differences over proposed changes to an accounting standard related to group audits, Pandey also flagged that there have been a series of corporate failures in the country and emphasised the need for high-quality reporting and auditing frameworks.
Speaking at a webinar on 'Risk-Based Approach of ISQM-1: Building High Quality Audit Firms', Pandey said the desire is to incorporate best global standards.
"We cannot create global audit firms without adhering to global standards," he added.
ISQM refers to International Standard on Quality Management.
He also said there has been a series of corporate failures in the last ten years and the amount involved is around Rs 2 lakh crore, he noted.
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The National Financial Reporting Authority (NFRA) has passed orders against some auditors and audit firms for lapses in relation to some of these failures.
According to Pandey, there is a strong desire to have homegrown big accounting and auditing firms in India, and the pre-requisite is to have global standards on accounting and auditing in place.
"We cannot conveniently say what we are doing is the best... it will be a myopic view," he said.
Mentioning about SA 600, the NFRA chief said the problem is that the responsibility of a principal auditor is uncertain with respect to group audits.
"Our desire to conform to the global standards..." he said and added that on SA 600, the regulator was not doing something unique.
SA 600 pertains to using the work of another auditor in the audit of group financial statements.
On October 3, NFRA said existing obligations of statutory auditors are not being correctly interpreted by a section of auditors and emphasised that principal auditors cannot contend that they did not perform adequate procedures in the audits of group financial statements of companies.
It had also observed that there have been gross negligence and audit failure in audits of group financial statements or cases of group audits involving various companies.
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