Objection to audit relief for small businesses aimed at protecting good governance: ICAI

ICAI’s clarification comes in the backdrop of its differences with audit regulator National Financial Reporting Authority (NFRA) over audit of small and medium companies that have sell-to-sales. ₹250 crores.

NFRA last month asked ICAI to conduct an impact assessment of the proposed accounting standard amendment for small companies and later brought out a consultation paper commenting on whether small and medium companies need to be exempted from statutory audit requirement And if so, what should be the threshold.

Responding to ICAI’s objection to the suggestion of giving audit exemption to small companies, Jambusaria said in a telephonic interview on Saturday that it is not for professional opportunities for chartered accountants that audit is mandatory for businesses.

“The world is changing. Many other avenues are opening up (for chartered accountants). The key question is whether we have a favorable position in India where we can avoid audit of a limited liability entity,” said ICAI. The chairman said. He referred to past instances of companies disappearing after taking public deposits. During the course of the audit, wrongdoers could have escaped by preparing their books of account to hide their access to public money.

“Serious lapses will come to the fore only when the audit is done. This is a good, preventive check. If we exempt small businesses from audits, who will supervise them – that’s the key question. It is not a question of protecting one’s income by asking someone else to spend it,” Jambusaria said.

ICAI issued a statement on Sunday saying that the NFRA does not have jurisdiction over micro, small and medium companies. “It is not within its purview to propose whether audit of any particular class of companies is required or not. However, we can see merit in getting these companies audited.”

“Audit is considered one of the pillars of an effective corporate governance system in companies, as it also helps in reducing the risk of failure in the implementation of corporate governance. Therefore, the preparation of financial statements and their audit can be done through legislation. The purpose of an independent audit is to provide confidence to the stakeholders of the audited financial statements, particularly in the quality of the financial reports. , their credibility.

Last month, the government had asked ICAI to conduct an impact assessment of the accounting standard amendments ICAI had proposed for smaller companies. The corporate ministry then quoted NFRA as saying that most of the companies to which ICAI’s revised accounting standards would apply are private limited companies, many with very low net worth or turnover or indebtedness or a combination of these. The ministry had noted that the general purpose financial statements (GPFS) of these companies would have the lowest public interest.

Emails sent to the ministry and Chairman of the Competition Commission of India Ashok Kumar Gupta, who currently holds the additional charge of the NFRA, remained unanswered at the time of publication.