Regulatory updates

Recently, ICAI issued certain FAQs relating to professional ethics of members pertaining to bank assignments (the FAQs). Some key matters clarified by the FAQs include:

• Long Form Audit Report (LFAR): One of the FAQs mentions that: Whether the concurrent auditor of a branch of a bank can undertake the assignment of LFAR of the same branch? In this regard, it has been provided that the concurrent auditor of a branch can undertake the assignment of LFAR only with respect to branches which are not subject to statutory audit. With regard to other branches, the LFAR assignment should be undertaken by the statutory auditor.
• Miscellaneous certification: The FAQs clarify that the concurrent auditor/internal auditor may undertake the assignment of certification for a bank branch, only if the certificates are addressed to the bank's management i.e., not addressed to the statutory auditor/regulator etc.
• Certification of audited financial statements: The FAQs state that a concurrent auditor/internal auditor can neither perform statutory audit of the financial statements of a bank branch, nor certify them as audited financial statements.

To access the text of the FAQs, please click here

The ICAI has formed an Expert Panel (the panel) in order to provide necessary support to the members in practice with respect to their queries on auditing aspects (pertaining to statutory audits) with the objective of enhancing audit quality.

The panel will address the queries from 17th April, 2023 till 30th September, 2023.

The queries are to be sent at email address: auditfaq@icai.in .

IFRS 9, Financial Instruments replaced IAS 39, Financial Instruments: Recognition and Measurement. Consequently, the International Accounting Standards Board (IASB) started the post-implementation review of IFRS 9 by looking at the classification and measurement requirements.

In this regard, ICAI has now requested for public comments on the request for information on post-implementation review of IFRS 9.

Comments can be sent to ICAI by 31 July 2023.

Comments can be sent to IASB by 27 September 2023.

To access the text of the post-implementation review, please click here

ICAI has hosted on its website the request for information on post-implementation review of IFRS 15, Revenue from Contracts with Customers issued by the IASB, which as a part of its review of the new requirements in IFRS 15 is seeking feedback from the stakeholders.

Comments can be sent to ICAI by 31 August 2023.

Comments can be sent to IASB by 27 October 2023.

To access the text of the post-implementation review, please click here

On 19 August 2023, ICAI issued a clarification regarding the authority attached to the documents issued by it.

The clarification states that while the accounting and auditing standards are required to be complied with, the guidance notes are recommendatory in nature. Further, in cases where the recommendations of the guidance note have not been complied with, then disclosures should be made on why alternative procedures were adopted and the reason why guidance note was not complied with. In such cases, auditors should review whether the guidance note has been complied with, and where it has not, then they may consider a disclosure in the audit report regarding such fact.

To access the text of the ICAI clarification, please click here

On 18 October 2023, ICAI issued an announcement, sensitising companies to abide by the provisions of Section 90 of the Companies Act, 2013 (the 2013 Act) read with the Companies (Significant Beneficial Owners) Rules, 2018 (the SBO Rules), pertaining to Significant Beneficial Ownership (SBO). The announcement is in line with the initiative of the MCA to create wider awareness of the SBO provisions. Some of the key aspects that have been reiterated in the announcement include:

• Meaning of SBO
• Declaration in e-form BEN-1
• SBO return in e-form BEN-2
• SBO register in e-form BEN-3

To access the text of the announcement, please click here

The Committee on Commercial Laws, Economic Advisory and NPO Cooperative of ICAI, on 7 December 2023, released information on red flag indicators, issued by FIU-IND w.r.t. the notification dated 3 May 2023 under the Prevention of Money Laundering Act, 2002 (the notification). ICAI has now issued certain FAQs on the notification in order to guide the members regarding the potential implications and responsibilities, including:

• Scope of covering Chartered Accountants under the money laundering offences
• Obligations of reporting entities under the PMLA
• Meaning of ‘transaction’
• Dealing with non-compliances, etc

To access the text of the FAQs, please click here

ICAI, vide an announcement dated 16 March 2024 has extended the applicability of peer review mandate for the practice units covered under Phase II and III as follows:

• Practice units which propose to undertake statutory audit of unlisted public companies having paid-up capital of not less than INR500 crores or having annual turnover of not less than INR1000 crores or having, in aggregate, outstanding loans, debentures and deposits of not less than INR500 crores as on 31 March of the immediately preceding financial year OR Practice units rendering attestation services and having five or more partners

(Grace period has been allowed up to 30 June 2024 and peer review would become mandatory w.e.f. 1 July 2024)

• Practice units which propose to undertake the statutory audit of entities which have raised funds from public or banks or financial institutions of over INR50 crores during the period under review, or of any body corporate including trusts which are covered under public interest entities OR Practice units rendering attestation services and having four or more partners (Peer review would become mandatory w.e.f. 1 January 2025).