Regulator Looks to Redraft Its Proposal

The National Financial Reporting Authority (NFRA) is planning to redraft its proposal to exempt small firms from mandatory statutory audit, said two people privy to the discussion.

A fresh discussion with the Institute of Chartered Accountant of India (ICAI) is also likely so as to avoid a direct conflict, they said. Audit regulator NFRA had sought public comments on a draft proposal it had floated on October 10 on whether MSMEs, depending on some criteria and threshold should be exempted from the mandatory statutory audit under the companies Act.

The proposal, however, drew opposition from the ICAI, which said the issue is outside of NFRA’s purview.

The audit watchdog is hopeful of reaching a consensus with the ICAI on all issues, including the exemption based on net worth of small firms, and accordingly send the revised proposal to its board for approval.

“We are looking at modifying the net worth criteria and will deliberate whether it could be done on a basis of a company’s turnover instead of net worth, so that it could benefit smaller firms without doing away the regulatory oversight of big firms,” an official privy to the plan told ET.

An email query sent to ICAI remained unanswered. Sources at the governing body said they are yet to receive any communication from NFRA on the matter.

In its draft paper, the audit watchdog had suggested that firms having a net worth below 250 crore should be kept out from audit purview. “Threshold of net worth is one of the contentious issues, which NFRA wants to decide in consultation with ICAI,” the official said.

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