NFRA, Regulators, ICAI agree to align key auditing standard

New Delhi, Aug 27, 2024

After months of discussion, the National Financial Reporting Authority (NFRA) on Monday decided to move towards the International Standard of Audit 600 (ISA 600) for all listed companies, barring public sector companies and state-run banks and their branches.

Separately, the Institute of Chartered Accountants of India (ICAI) also agreed to revise the Standard on Quality Management (SQM), a mechanism for quality management for audits or reviews of financial statements, where public consultations have been completed. ICAI will now share the paper with NFRA for further action.

The two issues came up during discussions of the NFRA board, with ICAI getting some leeway on unlisted large companies on the issue of ISA 600. In this case, updating the Indian Standard of Audit 600 (SA 600) will be discussed by ICAI and implementation will be decided later, sources familiar with the deliberations told TOI.

NFRA, along with RBI and Sebi, have backed a revamp of SA 600, which was implemented in 2002 but has not aligned with ISA 600, leaving major gaps when it came to auditing large and listed companies. NFRA will now issue an exposure draft, which will apply to listed private companies to begin with.

Based on the feedback the board will discuss the final standards in a few months before it is sent to the ministry of corporate affairs for notification, sources told TOI.

The gap in SA 600 and ISA 600 was noticed in several cases of fraud where the role of auditors and audit firms was reviewed by NFRA in recent months. SA 600 is critical for the use of the work of other auditors and the responsibilities of the principal auditor. It becomes crucial in the case of large companies, especially NBFC and banks.

[The Times of India]