India’s accounting watchdog, the National Financial Reporting Authority ( NFRA ) has recommended revising the Standard quality control ( SCQ1 ) and Standard quality management ( SQM1 and SQM2 ) according to the global mandates. However, the ICAI conveyed its disagreement to the 4 proposals.
In a meeting held by the NFRA, the authority recommended revising the SCQ and SQMs with minor contextual changes, to the Central Government for notifying under Section 143 (10) of the Companies Act 2013. Section 143 deals with the Powers and duties of auditors and auditing standards. The authority has approved 33 Auditing Standards concurring with the International standards.
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Section 143(10) of the Companies Act, 2013
The Section 143(10) of states that:
“The Central Government may prescribe the standards of auditing or any addendum thereto, as recommended by the Institute of Chartered Accountants of India, constituted under section 3 of the Chartered Accountants Act, 1949 (38 of 1949), in consultation with and after examination of the recommendations made by the National Financial Reporting Authority:
Provided that until any auditing standards are notified, any standard or standards of auditing specified by the Institute of Chartered Accountants of India shall be deemed to be the auditing standards.”
It also recommended SA 600 (Revised) on the lines of the global Standard ISA 600 with changes in the same above-mentioned provision of the companies act. The SA 600 (Revised) and relevant conforming adjustments in the other SAs are proposed to be applicable only to Public Interest Entities (PIEs) except Public Sector Banks, PSUs (including public sector insurance companies) and their branches, respectively.
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The NFRA also proposed aligning the liability framework for joint auditors under SA 299 with the adjustments set forth in SA 600 (Revised) to ensure consistency. This recommendation suggests holding joint auditors jointly and severally responsible, mirroring international standards.
It has also been recommended to notify three revised Standards on Auditing (SAs) under Section 143(10) of the Companies Act, 2013. These include SA 800 (Revised), which deals with special considerations for audits of financial statements prepared using a special purpose framework; SA 805 (Revised), which covers audits of individual financial statements and specified elements, accounts, or items of a financial statement; and SA 810 (Revised), which pertains to engagements to report on summary financial statements.
During the NFRA meeting, out of the 11 members present, eight expressed their support for the four proposals. However, the three representatives from the ICAI conveyed the disagreement to the proposals.
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Additionally, the NFRA recommended adopting the name “IndSAs” for the Auditing Standards, following the practice of countries like the UK, Australia, and Singapore. If approved by the Central Government, these standards are proposed to take effect from April 1, 2026.
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