ICAI Cannot Notify Auditing Standards Without Government Approval: SG

Solicitor General Tushar Mehta, in an opinion sought by the National Financial Reporting Authority (NFRA), stated that the ICAI cannot independently issue or notify quality management standards (SQMs) or make changes to auditing standards.

The 24-page opinion emphasised that such powers are transitory and require government notification, reports The Economic Times. This clarification comes after ICAI introduced two SQMs and made 16 amendments to auditing norms on October 14, moves deemed unlawful by NFRA. The NFRA asserted that aligning domestic audit practices with global standards requires a clear regulatory framework, reinforcing the need for government involvement.

The regulatory dispute highlights Section 143(10) of the Companies Act, which stipulates that auditing standards must be prescribed by the government following NFRA’s consultation.