NFRA Finalises and Recommends Auditing Standards for LLPs
The National Financial Reporting Authority (NFRA), during its 19th meeting on November 25, 2024, finalized and recommended Auditing Standards for notification under Section 34A of the LLP (Amendment) Act 2021. These recommendations, aimed at enhancing audit practices, have been forwarded to the Central Government for approval.
Key Recommendations
NFRA suggested that the 40 Standards on Auditing (SAs) and Standards on Quality Management (SQMs)—already applicable to company audits—should be extended to Limited Liability Partnerships (LLPs). These standards would apply mutatis mutandis to address LLP-specific requirements.
Highlights of the Meeting
Broad Support for the Proposal
Among the 8 members present, 7 endorsed the proposal, including representatives from CAG, RBI, and independent experts. However, ICAI representatives supported it with certain reservations.
ICAI Reservations
ICAI members raised specific concerns regarding the applicability of some SQMs and SAs:
- SA 299: Joint Audits
- SA 600: Using Work of Another Auditor
- SA 800, 805, and 810: Specialized reporting and auditing standards
Implementation Timeline
Once approved by the Central Government, the standards are proposed to take effect from April 1, 2026.
Significance of the Decision
This decision marks a significant step toward strengthening audit practices for LLPs. By adopting these robust standards, the following benefits are expected:
- Enhanced Audit Quality
LLP audits will align with global best practices, ensuring higher accuracy and reliability. - Improved Regulatory Compliance
The standards will elevate financial reporting and auditing benchmarks for LLPs. - Greater Transparency
Trust among stakeholders will improve, thanks to enhanced accountability and governance.
In conclusion, this move reflects NFRA’s dedication to advancing audit quality across all business entities, fostering greater trust in financial reporting.
