NFRA Approves Comprehensive Auditing Standards for Limited Liability Partnerships in India

The National Financial Reporting Authority (NFRA) has decided to propose various auditing standards for Limited Liability Partnerships (LLPs). These include 40 Standards of Auditing (SAs) and related Standards on Quality Management (SQM), which were finalised earlier this month for company audits. These standards will apply to LLP audits with necessary modifications, according to a recent release.

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During a meeting held on November 11-12, NFRA approved these 40 SAs and SQMs. However, some members of the Institute of Chartered Accountants of India (ICAI) opposed certain standards. Eight NFRA members attended the meeting, with seven supporting the proposals. This group included representatives from the Comptroller and Auditor General (CAG), Reserve Bank of India (RBI), and two independent experts: Narayanswamy, a retired professor from IIM Bangalore, and Sanjay Kallapur, a professor at ISB Hyderabad.

ICAI's Reservations on Specific Standards

ICAI members expressed concerns about specific standards such as SQMs, SA 299, SA 600, SA 800, SA 810, and SA 805. These reservations were previously mentioned during discussions on SAs and SQMs in earlier meetings. The ICAI president attended the meeting, while two other representatives shared their views via email.

SA 299 addresses the responsibilities of joint auditors, while SA 600 deals with auditing group companies. SA 800 is concerned with financial statements prepared under special purpose frameworks. SA 810 involves engagements to report on summary financial statements. Lastly, SA 805 focuses on audits of single financial statements and specific elements or accounts within them.

Implementation Timeline for New Standards

The NFRA consists of a total of 12 members. Once the central government gives its approval, these recommended standards will be implemented starting April 1, 2026. The chairperson and two full-time NFRA members also supported the proposals during the meeting.

This move aims to enhance auditing practices for LLPs by aligning them with existing company audit standards. The adoption of these standards is expected to improve transparency and accountability in financial reporting for LLPs.