This pause to revision course of (being undertaken by NFRA) is important to permit for a complete evaluate and dialogue with all related stakeholders to make sure that any adjustments are in the perfect curiosity of the occupation and public, the Institute of Chartered Accountants of India (ICAI) mentioned in a press release right here.
ICAI has additionally expressed “shock” over the NFRA transfer to challenge a session paper on revision of SA600 the identical day (September 17) when the Central Council of the CA Institute met to start out the evaluate of SA600.
‘Room for additional evaluate’
ICAI additionally famous that the Central Council had in its assembly on September 17, 2024, expressed that whereas the present SA 600 has been efficient and has stood the check of time, there’s room for additional evaluate and strengthening to higher serve public curiosity.
The Council has tasked the Auditing and Assurance Requirements Board (AASB) with this evaluate and began the method of reviewing the usual for publicity, as has been the apply in ICAI, in accordance with the assertion.
“Sadly, whereas this challenge was nonetheless being mentioned within the September 17 assembly of the Council, NFRA has come out with an Publicity Draft of SA 600 for revision inviting public feedback on the identical day, which has come as a shock to the Institute”, mentioned the ICAI assertion.
Due course of
As per the established apply, for revision of any normal, the Council of the Institute units up a Group, which, after completely inspecting all points concerned, releases an Publicity Draft of the usual for public feedback.
After contemplating the general public feedback and making mandatory adjustments, the AASB submits its report back to the Council. Following due deliberations, the Council forwards its suggestions on the requirements to NFRA. “This course of couldn’t be complied with within the current case, as NFRA has already issued the Publicity Draft for public feedback even when the Council was discussing this matter for evaluate,” ICAI assertion mentioned.
The bone of competition between ICAI and NFRA is in regards to the alignment of SA 600 with ISA 600 (Worldwide Commonplace of Auditing). Whereas NFRA is for full convergence, ICAI feels the Indian state of affairs requires carve-outs on the necessities of the auditing normal round group audits of enterprises. ICAI is against permitting the group auditor entry or look into the working papers of part auditors. This apply is, nonetheless, allowed within the worldwide normal.
Element auditor competencies
Worldwide ISA 600 requires the group auditor to evaluate the skilled competence of part auditors for firms throughout the similar group. In overseas jurisdictions, the auditors include completely different {qualifications} and audit just isn’t necessary for all firms below the regulation. Thus, they’ve the idea of Group and part auditor, in accordance with ICAI.
In India, all firms must be mandatorily audited by chartered accountants below the Firms Act, 2013. Since all chartered accountants are members of the ICAI, this ensures uniform normal of qualification {and professional} competence. “Given this uniformity, ICAI believes it’s neither doable nor fascinating for the group auditor to evaluate or train management over the choices of a part auditor who’s equally certified,” ICAI assertion mentioned.
Underneath the prevailing SA-600, the group auditor already has the facility to specify to what extent he relied on part auditor reporting and might search additional clarification or justification from the part auditor, if required, it added.
Relevance to Indian context
Worldwide ISA 600 defines a part auditor to be an auditor who performs audit work associated to a part for functions of the group audit. A part auditor is a part of the engagement workforce for group audit. This definition just isn’t related to the Indian context. The distinctive regulatory structure {and professional} surroundings in India necessitates a cautious consideration of home wants and circumstances earlier than transplanting abroad requirements.Additional, there are apprehensions within the minds of small and medium CA companies who’re typically entrusted with audit work of the subsidiary firms that the Group auditor within the guise of overseeing of high quality of their work and below the pretext of guaranteeing uniform high quality might persuade the managements to exchange the small audit companies of subsidiary firms with that of his personal companies resulting in focus of the audit work within the fingers of few companies. “This might make the survival of the small companies tough. In India, there arelarge variety of small CA companies in comparison with overseas jurisdictions”, ICAI assertion famous.
Consolidated monetary assertion
The present authorized framework in India mandates the preparation of consolidated monetary statements for holding and subsidiary firms. The duty for these consolidated monetary statements doesn’t lie with the important thing administration personnel and Boards of Administrators of the holding firm however with the Boards and key administration personnel of the respective subsidiary firms. If that be the case, it will be unfair and unjust to lock the legal responsibility on the group auditor alone ignoring the managements of the holding firm. As per the prevailing SA-700 (Revised), the respective Boards of Administrators of the businesses included within the Group are chargeable for upkeep of satisfactory accounting information as per regulation. “The proposed revision in SA 600 don’t adequately handle the problems arising out of the Group and part auditors and their inter-se relationship and duties”, ICAI assertion mentioned.
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