Reetu | Sep 21, 2024 |
ICAI releases Press Release Expressing Views on SA600 vs ISA(600)
The Institute of Chartered Accountants of India (ICAI) has highlighted major concerns about the application of the International Standard on Auditing (ISA) 600 in the Indian context.
During its September 17, 2024, Council meeting, the ICAI reviewed the current Standard on Auditing (SA) 600 and requested for a pause in its revision process to allow for a thorough assessment including all stakeholders.
According to the ICAI, under the Companies Act of 2013, all companies in India are required to have Chartered Accountants audit them. The ISA 600 requires group auditors to evaluate the professional abilities of component auditors within the same group. Because all Chartered Accountants are members of the ICAI, their qualifications and professional competence are consistent.
“It is neither possible nor desirable for the group auditor to assess or exercise control over the decisions of a component auditor who is equally qualified,” ICAI concluded.
The definition of a component auditor in ISA 600 does not reflect the Indian auditing environment. In India, small and medium Chartered Accountant Firms frequently audit subsidiary companies. There are worries that group auditors may persuade management to replace these smaller firms in the name of guaranteeing uniform quality, perhaps resulting in a concentration of audit work among a few larger firms. This could risk the existence of smaller businesses, which are more common in India than in other jurisdictions.
The ICAI pointed out that Indian law mandates holding and subsidiary corporations to prepare consolidated financial statements. These remarks are the responsibility of the relevant subsidiary firms’ boards and key management personnel, not the holding company’s management. According to the ICAI, placing the entire duty on the group auditor would be “unfair and unjust.” Furthermore, varying requirements from authorities such as SEBI, RBI, IRDA, and CAG hamper the group auditor’s capacity to assess the expertise of component auditors across industries.
The ICAI Council noted that, while the existing SA 600 has been effective, there is still an opportunity for improvement to better serve the public interest. The Council has asked the Auditing and Assurance Standards Board (AASB) to assess the standard and begin the routine procedure of issuing an exposure draft for public feedback.
However, the ICAI was surprised that the National Financial Reporting Authority (NFRA) issued its own exposure draft for the change of SA 600 on the same day as the Council meeting. Traditionally, the ICAI conducts a thorough study before sending recommendations to the NFRA.
“This process could not be complied with in the existing case as NFRA had previously released the exposure draft for public comments even when the Council was discussing this matter for review,” according to the ICAI.
Given these developments, the ICAI has requested a pause in the SA 600 revision process.
The Institute emphasized the importance of conducting a thorough evaluation and consulting with all key stakeholders to ensure that any changes made benefit both the profession and the public.
In case of any Doubt regarding Membership you can mail us at [email protected]
Join Studycafe's WhatsApp Group or Telegram Channel for Latest Updates on Government Job, Sarkari Naukri, Private Jobs, Income Tax, GST, Companies Act, Judgements and CA, CS, ICWA, and MUCH MORE!"