NFRA has no Jurisdiction over small, medium Companies : ICAI

Coming out strongly against certain recommendations made by NFRA, chartered accountants’ apex body ICAI on Sunday said the watchdog does not have jurisdiction over micro, small and medium companies, and asserted that audit helps in mitigating the risk of corporate governance lapses.

The Institute of Chartered Accountants of India (ICAI) also stressed that “there is no direct nexus between the quality of the audit and the cost of conducting the audit as is mentioned in a consultation paper by NFRA as the auditors have to comply with the standards in auditing and other relevant standards while conducting an audit.”

The latest comments from ICAI President Nihar N Jambusaria come less than two weeks after the National Financial Reporting Authority (NFRA) came out with a consultation paper on statutory audit and auditing standards for micro, small and medium companies (MSMCs).

In the consultation paper, for which public comments have been sought till November 10, NFRA said it was appropriate to revisit the requirement of complusory statutory audit for all companies irrespective of their size and/or public interest.

Besides, the watchdog cited its preliminary analysis on the key financial parameters of the companies and said the fees paid to auditors by a large majority of MSMCs are way below what an audit, when performed in compliance with the letter and spirit of the standards of auditing, would require.

Against this backdrop, Jambusaria said NFRA does not have jurisdiction over MSMCs.

“It is not within its purview to propose whether audit of a particular class of companies is required or not. However, we may look at merits in having audits of these companies,” he said.