NFRA Recommends Auditing Standard Changes: ICAI Disagrees

New Delhi, Nov 12 (PTI) The National Financial Reporting Authority (NFRA) board has recommended revisions to auditing standards SA 600 and SA 299 but ICAI representatives on the board have disagreed with the proposals.

Besides, the representatives of the Institute of Chartered Accountants of India (ICAI) have expressed concerns over the proposal to revise the Standard on Quality Control (SQC1) as Standards on Quality Management (SQM 1 and SQM 2).

During NFRA board's two-day meeting that ended on Tuesday, the regulator recommended revising SA 600 that pertains to audit of group companies and three other auditing standards, according to an official release.

There is also a recommendation to notify changes in three other SAs. They are SA 800-related to audits of financial statements prepared in accordance with special purpose frameworks and SA 805 pertaining to audits of single financial statements and specific elements, accounts or items of a financial statement.

The third one is SA 810 relating to engagements to report on summary financial statements.

As per the release, ICAI members have not agreed to these proposals also.

Meanwhile, at the meeting, 33 other auditing standards on lines of corresponding global standards were approved.

According to the regulator, it will recommend revising SA 600 on the lines of the global standard ISA 600 with some minor contextual changes to the corporate affairs ministry.

NFRA has been seeking changes against the backdrop of instances of the quality of audit in respect of group audits -- where SA 600 is applicable -- being found deficient and resulting in gross negligence by auditors.

At the meeting, it has also been recommended conforming adjustments with revised SA 600 "in the liability of joint auditors under SA 299, for consistency, by making the joint auditors jointly and severally responsible".

NFRA said 11 members of the board, including representatives of Comptroller & Auditor General (CAG), Reserve Bank of India (RBI) and Securities and Exchange Board of India (Sebi), independent experts -- Narayanswamy, Retired Professor from IIM Bangalore and Sanjay Kallapur, Professor at ISB, Hyderabad -- attended the meeting.

Besides, NFRA Chairperson and two full-time members were present while a representative from the corporate affairs ministry was not present.

The three ICAI representatives on the board expressed their disagreement to the proposal, the release said.

In a separate release, ICAI said it has strong concerns over revised SA 600 and SA 299, saying that existing SA 600 has all the powers and if required it can be strengthened but aligning the framework with ISA 600 is not desirable.

With respect to SA 299, ICAI said among others, the changes could lead to unnecessary duplication of work and increased costs in joint audits.

On SQM 1 & SQM 2, which is related to quality management for firms providing SoPs for firms and these are applicable to firms. ICAI is of the opinion are these are not auditing standards but quality management standards at firm level. The same was also considered by NFRA for notification as the standard on auditing.

Meanwhile, NFRA has decided to recommend to the ministry to name the auditing standards as IndSAs in line with the practice followed globally in countries such as the UK, Australia, and Singapore.

Once approved by the ministry, these revised standards are set to be effective from April 2026.