ICAI Moves to Clarify Division of Audit Responsibility

The Institute of Chartered Accountants of India (ICAI) now plans to clearly divide responsibilities between the principal auditor and the auditors of subsidiary companies. ICAI will also introduce a framework to fix accountability so that if something goes wrong, it will be clear who is responsible for the lapse.

The apex accountants’ body is also planning to submit its recommendation to the corporate affairs ministry and the National Financial Reporting Authority (NFRA) for the revision of a standard that had led to its rift with the NFRA last year.

NFRA had suggested changing Audit Standard (SA) 600 so that it matches international practices. Under this proposal, the main auditor (principal auditor) of a company group will be fully responsible for the financial statements of the entire group, including all subsidiaries. The idea is to ensure better accountability, stronger audits, and fewer chances of mistakes or fraud in group companies.

ICAI had opposed the move because it felt that most of the audit work would go to a few large firms, while small and mid-sized chartered accountant firms would get very little work.