NFRA Board Proposes Revisions to Auditing Standards SA 600 and SA 299 Amid ICAI Disagreement

The National Financial Reporting Authority (NFRA) board has proposed changes to auditing standards SA 600 and SA 299. However, representatives from the Institute of Chartered Accountants of India (ICAI) on the board have voiced their disagreement with these suggestions. The NFRA's two-day meeting concluded with recommendations to revise SA 600, which deals with group company audits, along with three other auditing standards.

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Proposed Changes to Auditing Standards

The NFRA has suggested notifying changes in three additional standards: SA 800, related to audits of financial statements prepared under special purpose frameworks; SA 805, concerning audits of single financial statements and specific elements; and SA 810, which pertains to engagements reporting on summary financial statements. ICAI members have also opposed these proposals.

During the meeting, the NFRA approved 33 other auditing standards aligned with global standards. The regulator plans to recommend revising SA 600 in line with the international standard ISA 600, with minor contextual adjustments, to the Ministry of Corporate Affairs. This revision is prompted by concerns over audit quality in group audits, where SA 600 applies.

Concerns Over Joint Audits

The NFRA has also recommended aligning joint auditors' liability under SA 299 with revised SA 600. This would make joint auditors jointly and severally responsible. However, ICAI argues that changes could lead to redundant work and increased costs in joint audits.

ICAI expressed strong concerns about revising SA 600 and SA 299. They believe existing SA 600 already provides sufficient authority and can be strengthened if needed. Aligning it with ISA 600 is seen as unnecessary by ICAI representatives.

Quality Management Standards

ICAI also raised issues regarding the proposal to revise Standard on Quality Control (SQC1) as Standards on Quality Management (SQM) 1 and SQM 2. These are related to quality management for firms providing standard operating procedures and are not considered auditing standards but rather firm-level quality management standards.

The NFRA meeting was attended by 11 board members, including representatives from the Comptroller & Auditor General (CAG), Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), independent experts Narayanswamy from IIM Bangalore, and Sanjay Kallapur from ISB Hyderabad. NFRA Chairperson and two full-time members were present, but a representative from the corporate affairs ministry was absent.

In a separate release, ICAI reiterated its concerns over the proposed revisions. They emphasised that aligning existing standards with global ones might not be beneficial. Meanwhile, NFRA plans to recommend naming auditing standards as IndSAs, following practices in countries like the UK, Australia, and Singapore.

These revised standards are expected to take effect from April 2026 once approved by the ministry.