The government is not willing to interfere in the workings of either the audit regulator, National Financial Reporting Authority (NFRA), or the Institute of Chartered Accountants of India (ICAI), despite the differences between the two statutory bodies on certain policies, said a person familiar with discussions seeking anonymity.
The ministry of corporate affairs (MCA) is of the view that the charters of the two institutions are clearly defined and are distinct, and their contradictory views on issues relating to statutory audit of small firms and the accounting standards applicable to them must be sorted out between themselves, he said.
“The charters of the two institutions are distinct. The Centre does not make any clarification on perceptions. If the government has to articulate anything, it will be in the form of Acts and rules,” the person added.
In September, NFRA asked ICAI to conduct an impact assessment with respect to the accounting standard revision it had proposed for small companies and then followed it up with a consultation paper seeking comments on whether small and medium firms should be exempted from statutory audit requirements and, if so, what should be the threshold.
Earlier this month, ICAI president Nihar N. Jambusaria told members that NFRA has no jurisdiction over small businesses and cannot take a call on whether they need to be audited, Mint had reported.
Industry executives said the ministry will have to take a final call as it is responsible for notifying accounting standards and policies based on suggestions and recommendations given by NFRA and ICAI.
However, so far, the ministry has neither intervened nor expressed its views with regards to proposals for revision of accounting standards for small companies and deciding whether to exempt them from statutory audits.
ICAI, established under an Act of Parliament, regulates the profession, conducts examinations, lays down ethical standards for professionals, formulates accounting standards and offers suggestions to the government on policy matters. NFRA recommends on accounting and auditing policies and standards for companies, besides enforcing compliance of the rules and the quality of service. Email queries to the corporate affairs ministry did not elicit a response till press time.
Subscribe to Mint Newsletters * Enter a valid email * Thank you for subscribing to our newsletter.
Never miss a story! Stay connected and informed with Mint.
our App Now!!