Concerns about new audit norms misplaced: NFRA's Ajay Bhushan Pandey
Delhi, Nov 14 2024
For a Viksit Bharat, India cannot afford audit standards that are inferior, NFRA Chairperson Ajay Bhushan Pandey said
Worries about audit getting concentrated in the hands of a few big firms owing to revision in auditing standards with respect to group companies are not justified, National Financial Reporting Authority (NFRA) Chairperson Ajay Bhushan Pandey told Business Standard.
“Misplaced anticipation about some unknown problem cannot stop us from aligning to global standards and work towards greater transparency and investor protection,” Pandey added.
He said even if there were remote examples of such cases those could be remedied by the government by putting a cap on the number of audits a group auditor could do for subsidiaries.
“For a Viksit Bharat, India needs to have global accounting and auditing standards.
We cannot afford to have standards that are inferior,” Pandey said.
The National Financial Regulatory Authority (NFRA), after its 18th board meeting on Tuesday, had recommended revision in 40 standards on auditing (SA), including the SA 600 and SA 299, which deal with group and joint audit, respectively.
The Institute of Chartered Accountants of India (ICAI) has opposed those standards on grounds that they will affect smaller firms and duplicate work.
The ICAI will approach the Ministry of Corporate Affairs (MCA) on the matter.
According to the revised standards recommended by the NFRA to the MCA, the group company’s auditor will also evaluate the component or the communications of the auditor of subsidiary company and the adequacy of their work.
The ICAI fears this would lead to group auditors taking over the work of component auditors.
However, Pandey said: “Nowhere do the standards say that the principal auditor has to do the work of a component auditor. That is why the apprehension of audit concentration is misplaced.”
He said most instances of recent major scams and corporate failures that the NFRA dealt with had a single thread that showed current auditing standards had loopholes.
While these loopholes were plugged internationally several years ago, he said India was yet to do that.
“The proposed revised standards will make it harder for people to suppress such scams for long and help bring them to light at an early stage and thereby protect the interests and enhance the faith of foreign and domestic investors, including retail investors, in India’s corporate governance,” he said.
After the NFRA’s recommendations, the MCA has to approve the new standards and notify them.
The NFRA has recommended the revised standards to be made effective from April 1, 2026, upon approval from the government.
[The Business Standard]
