New Delhi India’s two top audit regulators have brushed off their differences over a proposal to ease the statutory audit requirement of small businesses, following a change of guard at the top of both institutions.
Last September, the Institute of Chartered Accountants of India (ICAI) opposed a consultation paper by the National Financial Reporting Authority (NFRA), which proposed easing the statutory audit requirement for small businesses. While ICAI is India’s accounting rule maker and self-regulator of auditors, NFRA is the audit watchdog set up by the government.
ICAI President Debashish Mitra said in an interview that the two bodies are now working in a complementary manner, indicating the end of sharp differences over the statutory audit framework and tensions between the two institutions.
“We work in a complementary way. We respect NFRA like I also want to think that NFRA respects ICAI. Today we are not on a collision course. We are on the same page on the issue of audit quality. We both believe that the quality of audit should be very high,” Mitra said in the interview.
A government official, speaking on condition of anonymity, said the two institutions have held talks on major audit matters and exchanged views regularly. An email sent to the NFRA on Tuesday seeking comment for the story did not elicit any response till press time.
In March, former finance secretary Ajay Bhushan Pandey took over as the chairman of the NFRA after the watchdog’s first chairman Rangachari Sreedharan’s term ended last year. Sreedharan, the NFRA sought public comment on the audit framework for small businesses, which faced resistance from ICAI. ICAI also has a new chairman, as the term of the accounting rule maker is limited to one year.
The NFRA consultation paper sought comments on whether small and medium firms need to be exempted from statutory audit requirements and what should be the limit. ICAI then pointed out that the NFRA has no jurisdiction over small businesses to decide whether they need to be audited or not.
“That was a consultation paper by NFRA. ICAI took the stand that we were never consulted. We also stated that NFRA does not deal with such companies as it deals with entities of public interest. After that, I think we did not hear anything on that, neither from NFRA nor from the government,” Mitra said.
That consultation paper detailed how small firms get their audits done. A preliminary analysis of the NFRA revealed that the fees paid to auditors by a large majority of micro, small and medium companies were lower than when the audit was conducted in compliance with the letter and spirit of the audit’s standards. The watchdog then said it was appropriate to revisit the need for mandatory statutory audits for all companies.
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