ICAI Raises Concerns Over NFRA’s Draft Norms on Auditing Standards, Citing Risks to Smaller Firms

The ICAI has raised concerns over the National Financial Reporting Authority’s (NFRA) draft norms aimed at overhauling Standard on Auditing 600, according to a report by ET. The proposed revamp seeks to align domestic auditing standards with global norms. However, ICAI fears that this move could lead to a concentration of work among a few large firms.

The draft norms hold the principal auditor of a corporate group accountable for the financial statements of the entire group. ICAI worries that principal auditors, typically from larger firms, could take away the business from small and medium-sized firms by leveraging their influence over management. ICAI also opposes the provision that allows the principal auditor to assess the competence of other auditors.

NFRA has regulatory authority over auditors of all listed and large unlisted companies, while other auditors remain under ICAI’s jurisdiction. The new norms will apply only to listed companies and banks, excluding public sector units (PSUs).