ICAI Introduces New Audit Review Standards Amid Insolvencies

ICAI's Financial Reporting Review Board has unveiled new criteria such as low audit fees and negative reserves for reviewing company financials. The review aims to ensure compliance with Accounting Standards and reveal potential audit quality issues, especially for firms undergoing insolvency resolution processes.

The Institute of Chartered Accountants of India's Financial Reporting Review Board (FRRB) has implemented new parameters to enhance the quality of auditing among companies. These include low audit fees, negative reserves, high leverage, and involvement in insolvency resolution processes. The parameters will be integral to reviewing corporate financials.

The FRRB reviews company financial statements to ensure adherence to Accounting Standards, Standards on Auditing, and the Companies Act's Schedule II and III. It also checks compliance with guidance notes and RBI-issued master circulars/directions. A senior ICAI official emphasized that while the audit fee is a selection criterion, the primary interest is maintaining audit quality.

From April to September, 1,307 cases were considered, with 813 resulting in advisories to auditors for significant non-compliance issues. The FRRB has referred cases to various regulators and submitted reports on political parties' financials to the Election Commission. The FRRB employs a three-tier review process involving multiple chartered accountants.