The Ministry of Corporate Affairs (MCA) is expected to notify a comprehensive package of 40 revised Standards on Auditing (SAs) and Standards on Quality Management (SQMs), including the closely watched Standard on Auditing (SA) 600, by the end of July or by the middle of August. The move will mark one of the most extensive overhauls of India’s audit regulatory framework in recent years, with the revised standards proposed to come into force from April 1, 2027.
According to officials familiar with the matter, the technical framework has already been finalized, and the notification process is currently in its final administrative phase.
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Notification Process Underway
Sources indicated that while the policy framework has been completed, the notification must be issued in both English and Hindi before it can be formally published.
An official familiar with the development stated that the translation and publication process is expected to take around 30 to 45 days, making the end of July to mid-August the likely timeline for issuance of the notification.
The extended implementation timeline until April 2027 is intended to provide audit firms, companies and other stakeholders with sufficient time to align their systems, processes and professional practices with the revised standards.
SA 600 Emerges as the Most Significant Reform
Among the proposed standards, the revised Standard on Auditing (SA) 600 has generated the most discussion within the auditing profession.
SA 600 governs audits of group financial statements where multiple component auditors are involved. The revised framework significantly enhances the responsibilities of the group engagement auditor, requiring greater participation in planning, directing, supervising and evaluating the work carried out by component auditors.
The objective is to ensure stronger oversight and improve the quality and consistency of audits involving complex corporate groups operating across multiple entities or jurisdictions.
NFRA and ICAI Held Extensive Consultations
The revised SA 600 was the subject of detailed deliberations between the National Financial Reporting Authority (NFRA) and the Institute of Chartered Accountants of India (ICAI).
NFRA maintained that the revised standard has been aligned with the updated International Standard on Auditing (ISA) 600, while incorporating modifications considered appropriate for the Indian regulatory environment. According to the regulator, the revised framework is designed to strengthen audit quality, particularly in large and complex group audits.
ICAI, however, expressed reservations during the consultation process. The institute argued that certain provisions of the revised standard may not fully reflect the practical realities of India’s audit ecosystem and could disproportionately affect small and medium-sized audit firms.
Despite these concerns, NFRA retained the revised SA 600 after evaluating stakeholder feedback and recommended its adoption by the Central Government.
New Quality Management Framework to Replace Existing System
Alongside the revised auditing standards, the MCA is also expected to notify Standards on Quality Management (SQM 1 and SQM 2).
These standards will replace the existing quality control framework with a more comprehensive risk-based quality management system for audit firms.
Under the revised framework, audit firms will be required to establish systems capable of continuously identifying, assessing and responding to risks that could impact audit quality. The standards cover areas including:
- Governance and leadership
- Ethical compliance
- Client acceptance and continuance
- Engagement performance
- Technology and intellectual resources
- Monitoring and remediation processes
The proposed SQMs were also extensively discussed between NFRA and ICAI before being finalized.
Statutory Process Under the Companies Act
The notification of auditing standards is governed by Section 143(10) of the Companies Act, 2013, under which the Central Government prescribes auditing standards based on recommendations made by NFRA.
As part of this statutory process, NFRA consulted ICAI and various stakeholders before finalizing the revised standards.
In September 2024, NFRA released the exposure draft of the revised SA 600 for public consultation, citing regulatory inspection findings, enforcement experience and developments in international auditing standards as the basis for revising the framework.
Subsequently, during its meetings in November 2024, the NFRA Board approved a package comprising 40 revised Standards on Auditing and Standards on Quality Management for recommendation to the Ministry of Corporate Affairs.
Although the overall package received broad support, ICAI representatives recorded dissenting views on certain proposals, including SA 600, SQM 1, SQM 2, SA 299 and some special-purpose auditing standards.
Final Administrative Stage Before Notification
According to officials, the Ministry has now completed the policy framework and is undertaking the final administrative formalities before issuing the notification.
Once notified, the revised standards will provide a substantially updated auditing framework designed to improve audit quality, strengthen accountability of auditors, modernize quality management systems and align India’s auditing practices more closely with evolving international standards while incorporating modifications suited to domestic regulatory requirements.
Implementation Proposed from April 2027
The revised auditing framework is proposed to become effective from April 1, 2027. The transition period is expected to allow audit firms to redesign their quality management systems, train personnel, update methodologies and ensure compliance with the enhanced regulatory requirements before the new standards become mandatory.
The notification is expected to represent one of the most consequential reforms to India‘s auditing and assurance framework in recent years, with significant implications for statutory auditors, audit firms, corporate entities and financial reporting practices across the country.
