India’s two primary audit
watchdogs—the National Financial Reporting Authority (NFRA) and the
Institute of Chartered Accountants of India (ICAI) are again at loggerheads
over whether chartered accountant firms auditing a diversified company should
also sign off on the audits of subsidiaries.
As a background, NFRA is the regulator for the quality of audits
of companies . ICAI is the standard setter for the profession as well as
responsible for the interests of the auditors.
As per Rule, if NFRA starts an investigation into a Company's
audit, the ICAI must stop its own investigation.
The tension is about "Standard of Auditing (SA)
600." NFRA wants the Indian auditing standards to
align with the global best practices, whereas ICAI has opposed it. Unsaid is
the fear that the concentration of responsibility could take away the scope of
work from the stand-alone audit firms.
As per media reports, both have decided on a temporary truce.
They will not go public with their differences but work behind the scenes to
reconcile their differences.
OUR VIEW:
The move to make auditors more responsible for the balance
sheets they sign off on is definitely in the right direction. The Indian
economy needs corporates whose numbers can provide confidence to the market,
reduce risks and so bring in more investments in the financial markets. Both
the regulators are needed in the system and if they coordinate to sort out
their differences and work together, effectively producing better results - it
would benefit both.
NFRA had recently been in the News for all the right reasons,
covered extensively by our Regulatory News Summary. First, it was the NFRA Bill
tabled in the winter session of Parliament, which proposes to give them more Functional and Financial autonomy. Next, it was
the initiative by the agency to explore AI for better audit firm
inspections. Better coordination with ICAI will strengthen the NFRA further in
its work.
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Related Article
Link:https://economictimes.indiatimes.com/industry/services/consultancy-/-audit/nfra-icai-mull-mechanism-to-boost-regulatory-coordination/articleshow/129594811.cms?from=mdr
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