The Joint Parliamentary Committee (JPC) was set up to review the Corporate Laws (Amendment) Bill and has issued recommendations to the Ministry of Corporate Affairs (MCA). Its main concern is that the amendments should not give the National Financial Reporting Authority (NFRA) powers that override the statutory autonomy of the Institute of Chartered Accountants of India (ICAI).
The JPC stresses that NFRA’s role should stay focused on corporate financial oversight. All matters related to professional development, standard drafting, and core accounting functions should remain under the statutory purview of ICAI.
Originally NFRA was meant to provide limited oversight over accounting and auditing standards for public interest entities. The committee warns that expanding its powers for registration, investigation, and regulation‑making could overlap with ICAI’s functions, leading to duplication, fragmentation, higher compliance costs, and uncertainty about jurisdiction.
Clause 41 of the Bill proposes a new Section 132K in the Companies Act. This section would introduce transparency and a periodic review of NFRA’s regulations, requiring a 30‑day public consultation period before new rules are issued.
The JPC also calls for safeguards to prevent misuse of NFRA’s regulation‑making authority, ensuring that the process remains accountable and well‑defined.
The Bill adds a restriction on auditors providing non‑audit services. It proposes a three‑year cooling‑off period after an auditor’s term ends, with a transitional period for those already offering such services. The committee recommends shortening this period to one year, arguing that the longer duration is burdensome for group companies and auditors who resign or are not reappointed mid‑term.
This change will affect large audit firms that also offer consulting services. Many firms worry that the cooling‑off period will limit their ability to provide complementary services to clients.
An ICAI official noted that a regulatory shift of this nature would impact the entire ecosystem, not just a handful of big players, because over a hundred international network firms operate in India.
The Ministry is expected to issue a revised SA‑600 standard for auditors, a move that has sparked disagreement between NFRA and ICAI. SA‑600 governs how a principal auditor handles financial information prepared by component auditors.
The revised standard would strengthen the accountability of group auditors by requiring them to be more involved in planning, directing, supervising, and evaluating the work of component auditors.
NFRA has pushed for a stricter framework that aligns with International Standard on Auditing (ISA 600). However, ICAI and small‑to‑medium audit firms strongly resist the change, fearing it would impose excessive obligations.
Small and medium accounting practices (SMPs) express concern that if large corporate group auditors are made fully responsible, these firms may pressure subsidiaries to hire the same large audit firm. This could price local or mid‑tier firms out of corporate audits.