ICAI Council approves revisions in auditing standard SA 600

New Delhi, Dec 11 (PTI) Chartered accountants' apex body ICAI's Central Council has cleared revisions to the auditing standard SA 600 pertaining to group audits amid the institute and regulator NFRA being on different parts on the applicability of the standard.

The Standard on Auditing (SA) 600 is applicable in the case of the audit of companies which have subsidiaries and associates. Broadly, the holding company is audited by a principal or main auditor and the subsidiaries and/or associates by other or component auditors.

While the National Financial Reporting Authority (NFRA) has mooted changes to the standard, citing several cases of corporate fraud and audit failures/deficiencies in recent times, the Institute of Chartered Accountants of India (ICAI) is of the view that the revision could adversely impact small and medium CA (Chartered Accountant) firms.

ICAI President Charanjot Singh Nanda on Thursday said the revised SA 600, approved by the Council, will be sent to the NFRA and the Ministry of Corporate Affairs (MCA).

An expert group constituted by the President finalised the draft of the revised SA 600 after NFRA had suggested that the principal auditor can assess the work of component auditors.

According to the Council, the revised draft SA 600 represents a significant improvement over the existing version in terms of structure, clarity, and regulatory responsiveness.

The revised auditing standard lays down a clear framework for reliance on the work of the other auditor and establishes accountability parameters for both the principal auditor and the other auditor, Nanda said.

Also, there are enhanced written instructions that will help promote strengthened professional scepticism and robust professional judgment by both auditors, he said, adding that there will be more flexibility for the principal auditor's procedures.

It will enable the principal auditor, where necessary, to review component records, visit the component, perform direct audit procedures, and issue a modified opinion if required.

Besides, Nanda said the revised SA 600 ensures symmetry of critical audit information between the principal auditor and the other auditor.

NFRA has suggested that a group auditor can assess the decisions of a component auditor, while ICAI is of the view that under the existing SA 600, the group auditor already has the power to specify to what extent he relied on the component auditor's reporting and can seek further clarification or justification from the component auditor, if required.

Both the Institute of Chartered Accountants of India (ICA) and NFRA come under the MCA. PTI RAM SHW