NFRA prepares consultation paper on auditing standards for MSMEs

The National Financial Reporting Authority (NFRA) issued a consultation paper on statutory audit and auditing standards for Micro, Small and Medium Companies (MSMCs).

In a release, the auditing watchdog said it was appropriate to revisit the requirement of compulsory statutory audit for all companies irrespective of their size and/or public interest.

The statement also revealed it has prepared a consultation paper explaining the issues and the information required "for responding to the questions raised with the objective of seeking comments" on statutory audit and auditing standards for micro, small and medium businesses from its stakeholders.

The deadline for submitting all the suggestions is November 10, 2021.

According to a preliminary analysis done by the regulator on the key financial parameters of the companies, the fees paid to auditors by a large majority of MSMCs are way below what an audit, when performed in compliance with the letter and spirit of the standards of auditing, would require.

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"Even in India, an income tax audit is now not compulsory, where the turnover is Rs 10 crore or less, provided not more than 5 percent of the transactions are in cash. Goods and Services Tax (GST) audit has also been completely done away with," the release said.

In a recent development, NFRA has urged the government to initiate action against 1,011 auditors and audit firms for failing to submit requisite filings.

According to the release, it has recommended the corporate affairs ministry to take action against the non-compliant entities under the companies law.

NFRA was established by the government in October 2018 to formulate and lay down accounting and auditing policies and standards for adoption by companies or classes of companies or their auditors.