India’s National Financial Reporting Authority (NFRA) is planning to adopt global accounting standards to foster big homegrown firms in the country, news agency PTI reported.
This development comes amid the ongoing discussions and differences with the Institute of Chartered Accountants of India (ICAI) over proposed changes to an accounting standard related to group audits.
In September 2024, ICAI called for a halt in the revision of auditing standards.
NFRA chairperson Ajay Bhushan Prasad Pandey highlighted the series of corporate failures in India over the past decade, involving approximately Rs20trn ($238.21bn), and the need for reporting and auditing frameworks.
Speaking at a webinar titled ‘Risk-Based Approach of ISQM-1: Building High Quality Audit Firms’, he expressed the need to align with the best global practices in the sector.
“We cannot create global audit firms without adhering to global standards,” the new agency quoted Pandey as saying.
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By GlobalDataNFRA is said to have taken action against several auditors and audit firms for lapses associated with these corporate failures.
He emphasised the strong desire to cultivate domestic accounting and auditing entities, which necessitates the establishment of international standards in the field.
Focusing on SA 600, which deals with the use of another auditor’s work in group financial statement audits, he pointed out the ambiguity surrounding the principal auditor’s responsibilities in group audits.
The NFRA has observed that the existing obligations of statutory auditors are often misinterpreted, leading to gross negligence and audit failures in group financial statement audits.
The regulator has made it clear that principal auditors cannot claim they did not perform adequate procedures during the audits of group financial statements.
