NFRA inches ahead of ICAI on regulatory turf

The National Financial Reporting Authority (NFRA) has secured an edge over the Institute of Chartered Accountants of India (ICAI) in regulating the audit and accounting profession, with the Solicitor General of India backing the former's powers in some respects.

- Gireesh Chandra Prasad

ICAI cannot investigate statutory auditors of listed companies and large unlisted businesses governed by NFRA, according to the legal opinion given by Solicitor General Tushar Mehta, two persons informed about the development said.

The top lawyer also endorsed NFRA's power to make independent recommendations to the government on audit and accounting standards, going beyond merely commenting on ICAI's recommendations.

Mehta's backing of NFRA's power to give independent recommendations gives the authority a free hand in rule-making.

The Solicitor General also said that once NFRA submits its recommendations, the ministry may not need to consult ICAI again on the matter, and is free to seek more inputs from either of the bodies if it wants.

The legal opinion, which follows a request from the authority, comes at a time NFRA and ICAI have differed over harmonizing Indian audit standards with international standards on the norms governing the audit of group financial statements.

NFRA had on 12 November recommended to the ministry of corporate affairs to notify SA 600, an audit standard for group financial statements, making the lead auditor responsible for consolidated financial statements even if subsidiaries are audited by others.