NFRA intends to revise auditing norms for small CA Firms

According to two people familiar with the conversation, the National Financial Reporting Authority (NFRA) aims to conduct a new review of its proposal to exempt small businesses from mandatory statutory auditing and may issue a revised draught report on it.

They claim that in order to prevent a clash, the authority would begin a new round of discussions with the Institute of Chartered Accountants (ICAI) on the proposal’s controversial aspects.

“We are considering changing the net worth requirement and will consider if it may be done on the basis of a company’s turnover rather than net worth in order to help smaller enterprises while maintaining regulatory control of larger firms,” an official stated.

The audit regulator NFRA, which was established by the Centre in October 2018, is seeking public feedback on a draught proposal it released on October 10 on whether MSMEs could be exempted from the Companies Act’s mandated statutory audit, based on certain criteria and thresholds.

The ICAI, on the other hand, was not pleased with the suggestion. They believe the plan is outside of NFRA’s purview, and they will not decide whether or not an audit of a specific class of companies is required.

ICAI did not respond to an email sent to them. NFRA has yet to communicate with the regulating body on the topic, according to sources at the governing body.

In a draught study, the audit body advised that enterprises with a net worth of less than Rs 250 crore be exempted from audit. “One of the controversial topics is the net worth threshold, which NFRA intends to decide in cooperation with ICAI,” the official said.

According to him, the NFRA must be managed in a way that ensures peace among all stakeholders, including the ICAI. There can’t always be disagreements over duties and responsibilities. According to him, the government has given both institutions mandates that must be implemented.

He went on to say that the proposal’s goal isn’t just to help with compliance, but also to meet the goal of ease of doing business. All relevant information, such as bank accounts and GST reports, is being collected. According to him, enterprises with a revenue of Rs.10 crore or less are excluded from tax audits.

Those close to the CA profession, on the other hand, believe that eliminating the mandatory audit obligation will have an impact on governance standards. “The primary goal of the audit is to ensure that organisations have an efficient governance framework.” Even tiny businesses require audits to ensure that they are in compliance with all requirements.