The National Financial Reporting Authority (NFRA) has backed the Institute of Chartered Accountants of India (ICAI) and recommended that only Chartered Accountants (CAs) be authorised to conduct tax audits under the proposed Income-Tax Bill, 2025.
According to sources familiar with the matter, NFRA conveyed its recommendations during stakeholder consultations with the Parliamentary Standing Committee examining the draft bill. NFRA emphasised that tax audits must be entrusted solely to professionals with demonstrable expertise in applying auditing standards, quality management systems, and independence standards — competencies that currently only Chartered Accountants possess.
“Tax audits must be entrusted only to professionals trained in the application of auditing standards, quality management systems, and independence standards, including the Code of Ethics. Presently, only Chartered Accountants meet these requirements,” NFRA is reported to have told the Committee.
While supporting the ICAI’s existing role, NFRA also advised that if the government intends to consider Cost Accountants (CMAs) or Company Secretaries (CSs) for tax audit roles in the future, their curriculum and training must first be aligned with audit and attestation standards.
Rare NFRA-ICAI Alignment
This position reflects a rare alignment between NFRA and ICAI, especially given their historical disagreements on regulatory issues, such as Auditing Standard SA 600 and the Standards of Quality Management (SQM). Their consensus on the draft legislation highlights a mutual emphasis on audit quality and professional competence in tax attestation functions.
Parliamentary Panel Retains ICAI’s Role
The Select Committee of the Lok Sabha, chaired by BJP MP Baijayant Panda, conducted extensive consultations with stakeholders, including NFRA, the Ministry of Corporate Affairs (MCA), ICAI, ICMAI, ICSI, and other industry bodies. The Committee appears to have leaned in favour of retaining ICAI’s exclusive role in tax audits, in line with NFRA’s recommendation.
Despite attempts, NFRA did not respond to requests for confirmation at the time of this report’s publication.
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