ICAI, NFRA differ on auditing biz groups

checks and balances.

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‘The ICAL approved a revised version of SA 600 on 10 December which will be sent to NFRA, allowing lead auditors to inspect subsidiary auditors’ records and introducing safeguards, but stops short of assigning total liability on the lead auditor. Meanwhile, the NFRA has already sent its own stricter version assigning full responsibility of the group audits on the lead auditor to the corporate affairs ministry, which must now decide on the appropriate framework.

A ministry notification will assign responsibilities of the lead auditor and chart the audit journey for thousands of companies with subsidiaries. A person aware of the matter said ICAT’s revised framework is unlikely to win NFRA’s backing, given that it has already approved its version based on international standards and sent its alternative to the ministry for notification.

In its current form, SA 600 allows the lead auditor to rely on the work of a subsidiary’s auditor, subject to safeguards. NFRA, however, is of the view that this model is weak in practical application due to excessive reliance on the subsidiary auditors’ work without adequate supervision.