Objection to audit relief for small businesses to protect good governance: ICAI
NEW DELHI : The objection of the Institute of Chartered Accountants of India (ICAI) to the exemption of small businesses from statutory audit is aimed at ensuring good governance, President Nihar N. Jambusaria said in an interview. He denied that it had anything to do with protecting the job of chartered accountants.
ICAI’s clarification comes against the backdrop of its disagreements with the National Financial Reporting Authority (NFRA) audit regulator on auditing small and medium-sized businesses with sales up to ??250 crores.
Last month, the NFRA asked the ICAI to conduct an impact assessment of the revised accounting standards it was proposing for small businesses and then released a consultation paper seeking comments on whether whether or not small and medium-sized enterprises should benefit from a relaxation of the statutory audit requirement and, if so, what the threshold should be.
In response to a question about the ICAI’s objection to the suggestion to grant an audit exemption to small businesses, Jambusaria said in a telephone interview on Saturday that it was not for the professional opportunities of accountants. agreed that the audit was compulsory for companies.
“The world is changing. Many other new avenues are opening up (for accountants). The main question is whether in India we have a favorable situation where we can avoid auditing a liability entity. limited, ”said the president of ICAI.
“Serious errors will only arise if an audit is performed. It is a good preventive control. If we exempt small businesses from auditing, who will monitor them – that is the big question. It’s not about protecting someone’s income by asking someone else to incur an expense, ”Jambusaria said.
The ICAI issued a statement on Sunday saying that the NFRA does not have jurisdiction over micro, small and medium enterprises. “It is not within its remit to suggest whether the audit of a particular category of companies is required or not. However, we can look at the benefits of having audits of these companies, ”ICAI said.
“Auditing is considered to be one of the pillars of an effective corporate governance system in companies, as it also helps to mitigate the risk of failure in the implementation of corporate governance. Therefore, the preparation of financial statements and their audit should be regulated by law, ”the statement said, adding that the purpose of an independent audit is to give the stakeholders of the audited financial statements confidence in the quality of the financial reports, in particular, their reliability.
Last month, the government asked the ICAI to carry out an impact assessment of the revised accounting standards that the ICAI had proposed for small businesses. The Business Department then said, citing the NFRA, that most of the companies to which the revised ICAI accounting standards will apply are limited liability companies, many of which have equity or revenue or earnings. very low debt or a combination of these. Public interest in the general purpose financial statements (GPFS) of these companies would most likely be minimal, the ministry noted.
Emails sent to the ministry and the chairman of India’s Competition Commission, Ashok Kumar Gupta, who currently holds the additional office of the NFRA, went unanswered at the time of publication.
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