ICAI, NFRA Clash Over Audit of Small Firms

The Institute of Chartered Accountants of India (ICAI) has come out strongly against a recent proposal of audit regulator National Financial Reporting Authority (NFRA) to do away with mandatory audits for small firms, indicating growing tensions between the two bodies.

“NFRA does not have jurisdiction over micro, small and medium companies. It is not within its purview to propose whether an audit of a particular class of companies is required or not,” the accounting body’s president, Nihar N Jambusaria, said.

Audit is considered to be one of the pillars of the effective corporate governance system in companies, as it also helps in mitigating the risk of failure in implementation of corporate governance, the ICAI argued.

“The government can introduce a single platform for reporting by companies so that the same information is not required to be filed with various regulators,” Jambusaria suggested.

Set up by the Centre in October 2018, audit regulator NFRA has sought comments by November 10 on whether MSMEs, depending upon some criteria and threshold, be exempted from the mandatory statutory audit under the Companies Act. “Major economies of the world require statutory audit for small companies only in case some minimum criteria of public interest are satisfied,” it noted in its consultation paper.

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