NFRA Approves Revised Auditing Standards

November 14, 2024

The National Financial Reporting Authority (NFRA) has recently approved a revised version of 40 auditing standards. This decision aligns with international auditing standards (ISA). The NFRA Board’s meeting concluded, focusing on key updates. The revised standards will be sent to the Central Government for notification.

Key Standards Approved

The NFRA Board approved several major standards. These include SQM1, SQM2, SA 600 (revised), SA 299 (revised), SA 800 (revised), SA 805 (revised), and SA 810 (revised). Out of the 40 standards, 38 were accepted with minor recommendations. The revisions aim to enhance compliance and transparency in financial reporting.

ICAI’s Concerns

The Institute of Chartered Accountants of India (ICAI) expressed strong concerns regarding SA 600 and SA 299. These standards involve reliance on the work of other auditors and joint audits of financial statements. Despite ICAI’s objections, the NFRA Board overruled their stance. This decision marks an important divergence between the two bodies.

NFRA has maintained its position on joint audits. The board insists that joint auditors must be jointly and severally responsible. This contradicts ICAI’s proposal for a division of responsibility among joint auditors. NFRA will also mandate cross-reviews of the work conducted by joint auditors. This aims to enhance accountability and quality in auditing practices.

Renaming of Standards

The NFRA has decided to rename the Standards on Auditing (SAs) as Ind SAs. This change aligns with the Indian Accounting Standards (Ind AS). The new nomenclature reflects a commitment to standardise auditing practices in India.

Implementation Timeline

The revamped auditing standards are set to take effect on April 1, 2026. This timeline allows stakeholders to adjust to the new requirements. The revisions are expected to improve the overall integrity of financial reporting in India.

The approval of these standards marks an important step towards aligning Indian auditing practices with international norms. Enhanced standards may lead to greater investor confidence. The revisions could also promote more rigorous auditing processes across the industry. This overhaul represents an important evolution in the regulatory landscape for auditors in India. The NFRA’s decisions will shape the future of financial reporting and auditing standards in the country.

Important Facts for Exams:
NFRA: The National Financial Reporting Authority oversees auditing standards in India. It aims to enhance compliance and transparency in financial reporting through revised auditing standards.
ICAI: The Institute of Chartered Accountants of India represents chartered accountants. It expressed concerns over revised standards SA 600 and SA 299 regarding auditor responsibilities and joint audits.
Ind SAs: Standards on Auditing will be renamed Ind SAs. This change aligns them with Indian Accounting Standards. It reflects a commitment to standardise auditing practices in India.

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