ICAI notifies Amendment to the Clarification Regarding Authority Attached to Documents issued by Institute

The Institute of Chartered Accountants of India(ICAI) has notified amendment to the “Clarification Regarding Authority Attached to Documents Issued by the Institute” and Consequential Amendment to the “Preface to the Standards on Quality Control, Auditing, Review, Other Assurance and Related Services”.

In 1985, the Council of the Institute of Chartered Accountants of India had issued a Clarification namely “Clarification Regarding Authority Attached to Documents Issued by the Institute” (“The Clarification”). The Clarification was revised in February 2022. The Clarification is in force as on date. The Clarification provides the level of authority of various documents issued by the Institute e.g. Accounting Standards, Auditing Standards, Guidance Notes on Accounting, Guidance Notes on Auditing.

The Council of ICAI at its 422nd meeting held on 30th June and 1st July 2023 considered the recommendations of the Auditing and Assurance Standards Board (AASB) of ICAI regarding some changes required to be made in the Clarification to provide more clarity, to make the provisions more robust and to remove the provisions which are not relevant in the present context. The Council also considered the recommendations of AASB regarding some consequential changes required to be made in “Paragraph 11 – Guidance Notes” of the “Preface to the Standards on Quality Control, Auditing, Review, Other Assurance and Related Services” (“The Preface”) in order to align the Preface with the changes made in the Clarification. At the meeting, the Council agreed with these recommendations and decided to issue the amended Clarification and the amended Preface.

Clarification Regarding Authority Attached to Documents Issued by the Institute

The Institute has, from time to time, issued ‘Guidance Notes’ on a number of matters. With the formation of the Accounting Standards Board and the Auditing and Assurance Standards Board, ‘Accounting Standards’ and ‘Standards on Auditing’ are also being issued.

Members have sought guidance regarding the level of authority attached to the various documents issued by the Institute and the degree of compliance required in respect thereof. This note is being issued to provide this guidance.

Guidance Notes, though recommendatory in nature, are issued to assist professional accountants in implementing the Engagement Standards and the Standards on Quality Control issued under the authority of the Council. Guidance Notes are also issued to provide guidance on other generic or industry specific audit issues, not necessarily arising out of a Standard. Professional accountants should be aware of and consider Guidance Notes applicable to the engagement. A professional accountant who does not consider and apply the guidance included in a relevant Guidance Note should take reasonable and adequate care in performing the alternate procedures adopted by him to deal with the objectives and basic principles set out in the Guidance Note. In such situations, a professional accountant should also document the rationale in performing the alternate procedures. Similarly, while discharging his attest function, a member should examine whether the recommendations in a Guidance Note relating to an accounting matter have been followed or not. If the same have not been followed, the member should consider whether keeping in view the circumstances of the case, a disclosure in his report is necessary in accordance with Engagement Standards.

The ‘Accounting Standards’ and ‘Standards on Auditing’ issued by the Accounting Standards Board and the Auditing and Assurance Standards Board, respectively, establish standards which have to be complied with to ensure that financial statements are prepared in accordance with generally accepted accounting standards and that auditors carry out their audits in accordance with the generally accepted auditing practices. They become mandatory on the dates specified either in the respective document or by notification issued by the Council.

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