New Delhi: The National Financial Reporting Authority (NFRA) has recommended the Central Government to revise the Standard Quality Control (SCQ1) and Standard Quality Management (SQM1 and SQM2), following the global Standards Quality Management (ISQM1 and ISQM2), with minor contextual changes.
At its 18th Meeting on November 11 and 12, 2024, the NFRA approved its standards on quality control including the other 33 Auditing Standards on lines of corresponding Global Standards.
However, it also sought to revise the Standard of Auditing (SA) to align it with global standards ISA 600 with minor contextual changes. It recommended that the Central Government notify the changes under Section 143(10) of the Companies Act 2013.
It proposed that the SA 600 (Revised) and relevant conforming adjustments in the other SAs should be applicable only to Public Interest Entities (PIEs) except Public Sector Banks, Public Sector Undertakings (including public sector insurance companies) and their branches, respectively. Adding to this, it also recommended conforming adjustments with the SA 600 (Revised) in the liability of joint auditors under SA 299, for consistency, by making the joint auditors jointly and severally responsible, on the lines of the standard international practices, and recommend the same to the Central Government for notifying under Section 143(10) of the Companies Act, 2013.
It further recommended the three Standards of Auditing, SA 800 (Revised) (Special Considerations-Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks, SA 805 (Revised) (Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement, SA 810 (Revised) (Engagements to Report on Summary Financial Statements), for notifying under Section 143(10) of the Companies Act, 2013.
Out of 11 Members of NFRA attending the meeting, 8 supported these four proposals. They were the representatives of the Comptroller and Auditor General of India (CAG), the Reserve Bank of India (RBI), the Securities and Exchange Board of India (SEBI), two independent experts Professor Narayanswamy, Retired Professor IIM Bangalore, and Professor Sanjay Kallapur, Professor Indian School of Business, Hyderabad, two Full-Time Members of NFRA and Chairperson of NFRA The three ICAI representatives expressed their disagreement to the above four proposals.
In line with the practice followed globally in countries such as the United Kingdom, Australia, and Singapore, the Authority also recommended to the Central Government to name the Auditing Standards as IndSAs.
Upon the approval of the Central Government, these Standards are recommended to be effective from April 1, 2026.
– global bihari bureau
