The Nationwide Monetary Reporting Authority on Tuesday issued the revised Requirements on Auditing 600 (SA 600) for public session that may deal with deficiencies in group audit of companies that have been highlighted in a number of instances of company frauds. As per the revised norms, the group auditor could be chargeable for the audit work completed by different auditors for group entities.
“The revisions being proposed are to be utilized to audits of Public Curiosity Entities (PIEs) that fall below Rule 3 of NFRA Guidelines 2018, besides Public Sector Enterprises, Public Sector Banks, Public Sector Insurance coverage Entities, and their respective branches,” the NFRA stated.
SA 600 is utilized in case of audit of firms which have subsidiaries and associates, with the holding firm being audited by a principal or most important auditor and the subsidiaries and/or associates by ‘different’ or ‘element’ auditors. The usual outlines the tasks of the principal auditor vis a vis these of the element auditor.
“A number of the largest firms and corporations with important publicity to capital markets, traders, collectors and thereby involving big public curiosity, function by a community of subsidiaries, joint ventures, branches and associates which makes the necessities of this normal very important,” stated the NFRA, including that the standard of audit opinion on the consolidated monetary statements (CFS), which is relied upon by traders, collectors and different stakeholders, hinges in important half on how strong this normal is and the way it’s utilized by auditors in discharge of their audit tasks.
The problem had been taken up within the NFRA’s seventeenth Board assembly on August 26 the place the necessity for a revision in SA 600 was mentioned. The present SA 600 was issued by the Institute of Chartered Accountants of India in 2002 and has since not been up to date. The revised normal would convey the SA 600 to worldwide requirements.
Nonetheless, there have been a number of points associated to company frauds and associated audit failures, situations of gross negligence in audit of Group firms like Espresso Day International Restricted, Reliance Capital Restricted, Dewan Housing and Finance Restricted the place severe deficiencies had been noticed within the audit carried out by principal auditors and element auditors.
“The first purpose for proposing adoption of a revised Normal for group audits is to assist safeguard public curiosity and investor safety, and the necessity for a requirements framework that’s strong sufficient to satisfy the challenges posed by complicated monetary methods at present. The inherent complexity of group constructions… can’t be dealt with by the 2002 model of SA 600 and the associated provisions throughout different requirements,” the NFRA famous.
Based on sources, the ICAI has not been in favour of the revision mentioning that if within the revision, a Chartered Accountant will not be allowed to depend on the findings of one other Chartered Accountant, then the career and qualification can be undermined.
Nonetheless, the Reserve Financial institution of India, SEBI and the Comptroller and Auditor Basic of India have given their in precept approval to the proposed revision.
