The Ministry of Corporate Affairs (MCA) is set to notify a comprehensive package of 40 revised Standards on Auditing (SAs) and Standards on Quality Management (SQMs), including the much-debated Standard on Auditing (SA) 600, by the end of July or the middle of August, people familiar with the development told ETCFO.”The framework has been finalised. The operational process for notification is underway. Since the notification has to be published in both English and Hindi, it will take another 30 to 45 days. We expect the notification between the end of July and the middle of August,” a senior official told ETCFO on the condition of anonymity. The notification will conclude one of the most significant regulatory exercises in India’s audit landscape in recent years, aimed at strengthening audit quality and updating the country’s auditing framework in line with evolving international standards.The official said the revised standards are proposed to become effective from April 1, 2027, giving audit firms, companies and other stakeholders time to prepare for implementation.SA 600 at the centre of reformsAmong the standards proposed for notification, the revised SA 600 has attracted the greatest attention within the auditing profession.SA 600 prescribes the responsibilities of the group engagement auditor while auditing group financial statements involving multiple component auditors. The revised standard strengthens the accountability of the group auditor by requiring greater involvement in planning, directing, supervising and evaluating the work performed by component auditors.The standard has also been at the centre of extensive deliberations between the National Financial Reporting Authority (NFRA) and the Institute of Chartered Accountants of India (ICAI).NFRA has maintained that the revised SA 600 is aligned, with appropriate modifications, to the revised International Standard on Auditing (ISA) 600 and is intended to enhance audit quality, particularly for complex group audits. During the consultation process, ICAI expressed reservations over certain provisions, stating that some aspects of the proposed framework may not be fully suited to India’s audit ecosystem and could have implications for smaller and mid-sized audit firms. After considering stakeholder feedback, NFRA retained the revised standard while recommending it to the Central Government.New quality management standardsAlong with SA 600, the MCA is expected to notify Standards on Quality Management (SQM 1 and SQM 2), replacing the existing quality control framework with a risk-based quality management system for audit firms.The revised standards require firms to establish and continuously monitor systems to identify, assess and respond to risks affecting audit quality across governance, ethics, client acceptance, engagement performance, technological resources and monitoring.The quality management standards also formed part of the discussions between NFRA and ICAI before the recommendations were finalised.Regulatory process enters final stageUnder Section 143(10) of the Companies Act, 2013, the Central Government notifies auditing standards based on the recommendations of the National Financial Reporting Authority.As part of the standard-setting process, NFRA consulted ICAI and other stakeholders before finalising its recommendations.In September 2024, NFRA issued the exposure draft of the revised SA 600 for public consultation, citing inspection findings, enforcement experience and developments in international auditing standards.Subsequently, at its meetings in November 2024, the NFRA Board approved a package of 40 revised Standards on Auditing and Standards on Quality Management for recommendation to the Ministry of Corporate Affairs. While the revised package received broad support, ICAI representatives recorded differing views on certain proposals, including SA 600, the Standards on Quality Management, SA 299 and selected special-purpose auditing standards.According to sources, the Ministry has now completed the policy framework and is in the final administrative stage before issuing the notification.Biggest audit framework update in yearsOnce notified, the revised standards will represent one of the most significant updates to India’s auditing framework in recent years.Besides strengthening accountability in group audits through SA 600, the reforms introduce a modern quality management framework for audit firms and update multiple auditing standards in line with international developments while incorporating modifications considered appropriate for India’s regulatory environment.The revised framework is proposed to become applicable from April 1, 2027.
