The Institute of Chartered Accountants of India (ICAI) has defended its stance, saying it isn’t for exempting micro, small, and medium firms from mandatory statutory audit and that the National Financial Regulatory Authority has no jurisdiction over MSMEs.
ICAI mentioned the audit is a preventive test on firms, whether or not small or huge, which get pleasure from restricted legal responsibility of their shareholders.
“It is not within its purview to propose whether an audit of a particular class of companies is required or not. However, we may look at merits in having audits of these companies,” Nihar N Jambusaria, president, ICAI, in response to e-mail queries. NFRA, on its half, felt that the audit requirements must be aligned to the character, measurement, and complexity of those firms and their business wants, enterprise measurement, capability to adjust to the prescribed requirements, and relevance to their major customers. Asking ICAI to revisit the requirement of obligatory statutory audit for all firms no matter their measurement, NFRA mentioned: “…it is essential that the regulatory environment is conducive to support, and not burden, the growth in business and economic activities of these entities.”
It additionally mentioned main economies of the world require statutory audits for small firms solely in case some minimal standards of public curiosity are happy. This isn’t the primary time that the 2 audit regulators have been at loggerheads. ICAI has felt that NFRA’s disciplinary powers breach its space.
Recently, ICAI had additionally rejected the session paper of NFRA on “Enhancing engagement with stakeholders.” Jambusariya mentioned the paper made fallacious round argument analogies and was far from floor realities.
The newest bone of rivalry — ICAI’s strategy paper for the revised accounting standards — gives broad steering for formulation of all the brand new or current accounting standards to be adopted by the businesses not required to organize monetary statements underneath Ind AS and non-company entities. “While revising a standard, if it is considered necessary, certain prescriptions under approach paper may be amended,” ICAI has mentioned.
The institute has additionally strongly disagreed with NFRA’s remark that there was a mismatch between the present fee made to auditors and the estimated value for conducting an audit in compliance with the letter and true spirit of requirements of audit.
NFRA mentioned, “The inference that is inescapable is that such an audit as is being carried out is perhaps only a sham.”
ICAI mentioned there was no direct nexus between the standard of the audit and the price of conducting the audit. “The allocation of staff and number of hours as estimated for computing the standard cost of audit by NFRA are much higher as compared to the actuals,” Jambusariya mentioned.
ICAI president additionally mentioned that variety of handbook hours will get diminished to an incredible extent resulting from technological development within the subject of accounting and auditing. “It is true that CAs are not getting the true worth of the fees for their work…Auditors have done their work with integrity and honesty despite low scales of fees,” Jambusaria mentioned.
Globally, specialists mentioned international locations such because the US and the UK exempt small firms as much as a sure threshold from statutory audit necessities. ICAI president, nevertheless, mentioned India is a growing nation and the GDP of India and such different international locations should not at par with one another.
“International practices should be considered only after taking into account all the factors…In the Indian context, small companies have a major impact on the economy,” he mentioned.