Sa 600 Proposed Draft

NFRA
PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

SA 600 (REVISED), SPECIAL CONSIDERATIONS- AUDITS OF GROUP FINANCIAL STATEMENTS (INCLUDING THE WORK
OF COMPONENT AUDITORS)
Public Consultation and Request for Comments
NFRA invites individuals and organisations to comment on all aspects of the proposals in respect of
revision in SA 600 and, particularly, on the specific questions requested in this document. The revisions
being proposed are to be applied to audits of Public Interest Entities (PIEs) that fall under Rule 3 of
NFRA Rules 2018, except Public Sector Enterprises, Public Sector Banks, Public Sector Insurance
Entities, and their respective branches.
It would be most helpful if the comments identify and clearly explain the issue or question to which
they relate and if possible are supported by empirical data and a clear rationale. Those who disagree
with any proposal are requested to describe their suggested alternative(s), supported by specific
reasoning, and data as may be applicable.
It is requested that the comments in this regard to NFRA may be captioned as “Comments on
proposed SA 600 (Revised)” for ease of reference.
The draft of the proposed SA 600 (Revised) can be accessed at link below:
https://cdnbbsr.s3waas.gov.in/s3e2ad76f2326fbc6b56a45a56c59fafdb/uploads/2024/09/20240917131
3688475.pdf
Last date for receiving the comments is 30 October 2024.
Email [email protected] captioned “Comments on proposed SA 600

(Revised)”
Postal Captioned “Comments on proposed SA 600 (Revised)” to
Secretary, National Financial Reporting Authority
7th-8th Floor, Hindustan Times House,
18-20, Kasturba Gandhi Marg, New Delhi 110001.
NFRA

Purpose of this Public Consultation

This note covers the background and rationale for NFRA seeking public consultation regarding changes
proposed in SA 600-Using the work of Another Auditor, on the lines of the corresponding international
standard, ISA 600 issued by the International Auditing and Assurance Standards Board (IAASB),
pursuant to the decisions taken in the 17th Meeting of the National Financial reporting Authority, held
on 26.08.2024 (the record notes/minutes of Authority Meetings are available on NFRA website under
‘Disclosures’ tab). This Standard is applied in case of audit of companies which have subsidiaries and
associates, with the holding company being audited by a principal or main auditor and the subsidiaries
and/or associates by ‘other’ or ‘component’ auditors. The standard outlines the responsibilities of the
principal auditor vis a vis those of the component auditor. Some of the largest corporations and
companies with significant exposure to capital markets, investors, creditors and thereby involving huge
public interest, operate through a network of subsidiaries, joint ventures, branches and associates which
makes the requirements of this standard very significant. The quality of audit opinion on the
consolidated financial statements (CFS), which is relied upon by investors, creditors and other
stakeholders, hinges in significant part on how robust this standard is and how it is applied by auditors
in discharge of their audit responsibilities.
The revisions being proposed are to be applied to audits of Public Interest Entities (PIEs) that fall under
Rule 3 of NFRA Rules 2018, except Public Sector Enterprises, Public Sector Insurance
Companies, Public Sector Banks and their respective branches.
NFRA

Index
Sr no Topic Page
1. Introduction 2
2. Background 2
3. NFRA’s observations from enforcement cases relevant to the 3
proposal
4. NFRA’s objective in proposing revision to SA 600 and NFRA’s 3
obligations under law with respect to Standards Setting
5. Various Judicial and Parliamentary Committee pronouncements 5

on need to converge with global standards, and recommendations
of the Company Law Committee, 2022
6. Provisions in law relevant to the proposal 7
7. Key aspects of SA 600 which are at variance with ISA 600 (2002) 8
and with provisions in law
8. Basis for revision of ISA 600- IAASB- paramountcy to public 11

interest issues
9. Consultation with SEBI, RBI and CAG and their in-principle 13

agreement
10. Discussion on apprehension of concentration of audit 13

11. Public Consultation and Request for Comments 15
Annex 1 NFRA’s experience in enforcement cases-Group Audits 17
Annex 2 Group Legal Entity Structure Overview- Top 100 Listed 20

Companies
Annex 3 Extent of Participation/Responsibility of Component Auditors in 23
a sample of top Listed Companies
Annex 4 Adoption of ISA 600 internationally 26
Annex 5 Key aspects of the proposed revisions to SA 600 28
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Consultation Paper
1. Introduction
1.1 A high quality financial reporting framework is characterised by (a) Effective Independent
High-Quality Accounting & Auditing Standards-setters, (b) High Quality Auditing Standards,
(c) Active Regulatory Oversight, (d) Audit Firms with Effective Quality Controls World-wide
and (e) Profession-wide Quality Assurance. The notification of the National Financial
Reporting Authority (NFRA) in 2018 under Companies Act 2013 (CA 2013 or Act), as an
independent standard setter and independent audit regulator, along with convergence of
accounting standards (Ind AS) with the International Financial Reporting Standards (IFRS),
were significant milestones in India’s journey towards a high-quality financial reporting
framework.
1.2 The Companies Act 2013 ushered in more financial discipline by according a ‘Statutory’ status
to the Standards on Auditing (SAs) by way of incorporating following two sub-sections in
section 143, which came into force from 01.04.2014.
a) Sub-section 9 of section 143 which states that every auditor shall comply with the auditing
standards.
b) Sub-section 10 of Section 143 which states that the Central Government may prescribe the
standards of auditing or any addendum thereto, as recommended by the Institute of
Chartered Accountants of India (ICAI), in consultation with and after examination of the
recommendations made by the National Financial Reporting Authority (NFRA).
Proviso to above sub-section states that until the SAs are prescribed by the Central
Government, the SAs or Standards specified by the ICAI shall be deemed to be auditing
standards.
2. Background
2.1 Presently, the SAs have not yet been notified under the Act, and as per the proviso to section
143(10) of the Act, the standards specified by the ICAI in 2009 are in force. NFRA vide its
letter dated 20.07.2021and 15.09.2021 had advised AASB, ICAI to review and update the entire
set of auditing pronouncements in view of the changes in the statutory and legal framework in
India. Ministry of Corporate Affairs (MCA) vide its letter dated 11.08.2021 also requested ICAI
to submit a proposal to notify the SAs u/s 143 (10) of the Act. As per the ICAI, the Standards
developed and promulgated by the Auditing and Assurance Standards Board (AASB) under the
authority of the Council of the ICAI are in conformity with the corresponding International
Standards (ISAs) issued by the International Auditing and Assurance Standards Board
(IAASB).
2.2 ICAI submitted the drafts of 35 SAs (which included SA 600) to NFRA in November 2022. It
was observed that the SAs proposed by ICAI for consideration of NFRA did not consider
several changes that had been made to the ISAs over last several years. Consequent to NFRA
review and further correspondence with ICAI, exposure drafts (EDs) in respect of certain SAs
and Standards on Quality Management (on lines of the International Standard on Quality
Management-ISQM) were issued by the ICAI. However, regarding revision in SA 600 - Using
the work of Another Auditor, on the lines of the corresponding International Standard ISA 600,
ICAI stated that it has not adopted “ISA 600, Special Considerations ― Audits of Group
Financial Statements. (Including the Work of Component Auditors)”.
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3. NFRA’s observations from enforcement cases relevant to the proposal

3.1 In course of its functioning and investigation into matters referred to NFRA by the Ministry of
Corporate Affairs, GOI, Securities and Exchange Board of India, and cases taken up suo-moto
by NFRA, the quality of audit in respect of Group audits (to which SA 600 is applicable) has been
found to be severely deficient. In several cases of Public Interest Entities (PIEs), NFRA has
observed severe deficiencies and lack of understanding on the part of the audit firms and
auditors of their responsibilities in law, and improper application of the standards by the
Principal and Other auditors. This has resulted in gross negligence and serious lack of due
diligence by the auditors which is detrimental to the interests of the stakeholders in PIEs.
3.2 As examples, NFRA’s orders in cases of Group Audits involving various companies (Reliance
Capital Limited, Reliance Home Finance Limited, Reliance Commercial Finance Limited
(together alleged fraud of ₹ 29,000 Crores), Coffee Day Global Limited (alleged fraud of ₹ 3500
Crores), Dewan Housing and Finance Limited (alleged fraud of ₹ 34,000 Crores), and audit
quality review of IL&FS (which collapsed with a debt of ₹ 90,000 Crores ) etc., which are in
public domain (NFRA website), can be referred. A brief of the cases and the observed
deficiencies is placed at annex 1 which essentially shows an improper application of SA 600,
wherein a mechanical reliance was placed by the Principal Auditor on the work of the Other
Auditor without assessing the special circumstances that required additional audit procedures.
Annex 1 clearly brings out disadvantage that the users of the financial statements of these PIEs
have thus been put to. Across the above cases, there were several obvious indications of
siphoning off of funds through subsidiaries including promoter-controlled subsidiaries, non-
consolidation of significant subsidiaries in the consolidated financial statements, non-
performance of adequate audit procedures in the identification, assessment and conclusions of
risk of material misstatement, failure to verify related party transactions etc. On non-reporting
of fraud, in an instance, the Principal Auditor stated that ‘they had no obligation to evaluate the
fraud risk in any of the group companies’ and ‘they had no access to the books of the
subsidiaries audited by the other auditors.’ On evergreening of loans, they stated that while
various transactions were noted between the group companies there was no evergreening in the
company they audited.
4. NFRA’s objective in proposing revision to SA 600 and NFRA’s obligations under law with
respect to Standards Setting
4.1 Amongst other statutory functions of NFRA under CA 2013, section 132 (2) of CA 2013 states
that “Notwithstanding anything contained in any other law for the time being in force, the
National Financial Reporting Authority shall— (a) make recommendations to the Central
Government on the formulation and laying down of accounting and auditing policies and
standards for adoption by companies or class of companies or their auditors, as the case may
be; …”.
4.2 Rule 4 (1) of NFRA Rules 2018, further reinforces the importance of standard setting, and
provides for the objective of NFRA, ‘The Authority shall protect the public interest and
interest of investors, creditors and others associated with the companies and bodies corporate
governed under rule 3 by establishing high quality standards of accounting and auditing….”.
4.3 Section 132 (2) (a) of CA 2013 read with Rule 4 (1) of NFRA Rules 2018 places establishment
of high-quality standards of accounting and auditing in public interest as a core an obligation
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of NFRA and grants NFRA wide powers of recommending such standards to Central
Government for notification.
4.4 An analysis of the group legal entity structure of 100 listed companies in the large cap and
midcap category (excluding Banks/Insurance Entities) (annex 2) indicates that operations of
many of these entities are being carried out through a large number of separate components in
the form of subsidiaries, joint ventures and associates. 23 of these 100 had over 50 such
components and 76 of these 100 companies had overseas components. These kinds of operating
structures coupled with the statutory requirements for preparation of consolidated financial
statements and its mandatory audit requires the participation of audit firms or individual
auditors other than the Group Auditor.
4.5 Also, a broad review of Group Auditors’ report of CFS of these 100 listed companies indicates
a significant portion (above 50%) of net assets arising from the components; in case of 20
companies, the percentage is above 50%. Similarly, in case of 18 companies, the percentage of
total assets and in case of 17 companies, the percentage of total revenue audited by component
auditors was above 50% (annex 3).
4.6 Investor protection has also assumed greater importance today with there being 15.8 crore
demat accounts which are growing at 24% per annum. The stake of retail investors through the
route of Systematic Investment Plans (SIPs) of Mutual Funds is ever increasing. As of
30.06.2024, there are 19.10 Crore Mutual Funds investors. Latest data released by AMFI1
indicates that assets under management (AUM) of Mutual Funds has reached a gigantic size of
Rs 61.15 lakh crores as of 30.06.2024 as against Rs 24.25 crores five years ago. During last
five years (June 2019 – June 2024) 2 AUMs of Mutual Funds have depicted a growth rate of
152% as against 70% in Bank Deposits. Similarly, subscribers and assets under management
(AUM) of National Pension Schemes, which is also a key stakeholder in Financial and Capital
Markets, has grown significantly during the last five years. As per the bulletins of PFRDA3,
AUM has increased from Rs 3.38 lakh crores to Rs 12.14 lakh crores and the number of
subscribers has grown from to 7.46 lakhs to 71 lakhs. The instances of audit failure as detailed
in para 3 above and massive losses which the shareholders, banks, and other stakeholders
had to suffer, bring out the need and urgency of revising SA 600 in accordance with the global
standard. The proposed revision will go a long way in protecting the interest of retail and other
investors, creditors such as banks and other financial institutions, and foreign investors.
4.7 Internationally, successive revisions in ISA 600 have brought in greater responsibilities for the
lead auditor. As SA 600 impacts audit quality in listed companies, companies over certain
financial thresholds, banking and insurance companies, all of which constitute public interest
entities, its provisions need to stand the test of safeguarding overall ‘public interest’ and ‘trust’
in the financial sector in the country.
4.8 According to latest estimate by IMF, India will be contributing around 20% to the global
economy over the next decade. Rating agencies like CRISIL, predict that by 2031 India will be
1
Monthly Report June 2024 of Association of Mutual Funds in India (AMFI)
2
Governor, Reserve Bank of India on 19.07.2024
3
Pension Bulletins May 2024 & Aug 2014, Provident Fund Regulatory & Development Authority (PFRDA)
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$7 Tn economy. Over the next five years, the Indian economy is expected to surpass that of
Japan and Germany and become 3rd largest economy and have the 3rd largest Capital Market as
well. Volume of capital market activity has grown from Rs 1.47 lakh crores in June 2019 to
over Rs 4.12 lakh crores4 as of June 2024.
4.9 Therefore, India’s aspiration and objective to become a developed nation (Viksit Bharat) by
2047 and a leading economy over the next decade or so necessitates vibrant and deep capital
and financial markets attracting both domestic and international participants, which in turn
needs a financial reporting framework including standards and codes that are comparable to
prevailing global standards and best practices.
4.10 The recent OM of Cabinet Secretariat, GOI, dated 26 July 2024 reiterates the need for
incorporation of global benchmarks and best practices while preparing notes for cabinet/cabinet
committees, also conveyed through OM of Cabinet Secretariat, GOI, dated 19 July 2022. It
states that “at the stage of conceptualising/formulating proposals related to policy matters.
Schemes, programmes, projects etc, Ministries/Departments should examine global benchmark
and best practices on the subject concerned. The objective should be to suitably incorporate
global best practices and standards in policies, schemes, programmes, projects etc”.
4.11 Accordingly, and in keeping with NFRA’s obligations in law to protect public interest and the
interest of investors, creditors etc., the Authority is proposing improvements in the quality and
rigour of the SA 600 (with conforming adjustments across other Standards as will be applicable)
on audit of group financial statements on the lines of prevailing global standards. In India, SA
600 was issued by the ICAI in 2002 and has not been revised ever since, even when the
corresponding global standard has undergone significant changes in public interest, in 2009 and
then in 2023.
4.12 The primary reason for proposing adoption of a revised Standard for group audits is to
help safeguard public interest and investor protection, and the need for a standards
framework that is robust enough to meet the challenges posed by complex financial
systems today. The inherent complexity of group structures, as brought out in annex 1,
cannot be handled by the 2002 version of SA 600 and the related provisions across other
standards.
5. Various Judicial and Parliamentary Committee pronouncements on need to converge

with global standards, and recommendations of the Company Law Committee, 2022
5.1 Hon’ble Supreme Court 5 of India while dealing with a question whether AS 22 is ultra vires
the provisions of Companies Act, Income Tax Act and Constitution of India, has said as
follows:
“57. India is an emerging economy. Globalization has helped India to achieve the
GDP rate of around 8 to 9 per cent. However, with globalization, India is required
4
SEBI Bulletin June 2024
5
19.11.2017 J. K. Industries Ltd. & Anr vs Union Of India & Ors. Also refer para 9 of the said judgment. Hon’ble
Supreme Court in 2018 in S. Sukumar versus The Secretary, Institute of Chartered Accountants of India and
Hon’ble High Court of Delhi in 2024 in W.P.(C) 11944/2021 & CM APPL. 12020/2024 etc.
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to face challenges in various forms.Corporate India has been acquiring companies

in India and abroad. Indian companies are partners in joint ventures. They are part
of international consortium. Therefore, Indian Accounting Standards (IAS) have to
harmonize and integrate with International Accounting Standards by which
harmonization of various accounting policies, practices and principles could take
place.”
5.2 Hon’ble Supreme Court 6 of India while dealing with a question of regulatory mechanism
over multinational accounting firms had said the following,
“53. Accordingly, we issue the following directions:
(i)…….The Committee may also consider the need for an appropriate legislation
on the pattern of Sarbanes Oxley Act, 2002 and Dodd Frank Wall Street Reform
and Consumer Protection Act, 2010 in US or any other appropriate mechanism for
oversight of profession of the auditors….”
5.3 Hon’ble Delhi High Court 7 while dealing with writ petittions of partners of Indian network
firm of a MAF, had emphasised the imporance of global best practices as can be seen
from extract of judgment reprodcued below. (Empashsis supplied)
“109. There is an imminent need, therefore, for –
(a)….
(b) Undertaking a consultation in order to clearly set out as the framework in which
multinational accounting firms, whose presence is also necessary in India, can
operate. Such firms also contribute in bringing global best practices to India with
immense opportunities for youngsters. They also render services to Indian
businesses even at a global scale. Thus, the provisions relating to licensing
agreements, brand usage etc., also need to be looked into.”
5.4 The Parliamentary Standing Committees and Companies Bills (Emphasis supplied)
a) Standing Committee on Finance – 21st Report of 15 th Lok Sabha
“Need for change
3. … In the light of this background, modernization of corporate regulation
governing setting up and running of enterprises, structures for sharing risk and
reward, governance and accountability to the investors and other stakeholders and
structural changes in the law commensurate with global standards have become
critical for the maintenance and enhancement of a vibrant corporate sector and
business environment.
4…. Many Indian companies have become global and expanded their operations
beyond Indian borders with a spate of mergers and acquisitions abroad. Thus, the
corporate form has not only contributed significantly to the growth of the national
economy, but has helped Indian entrepreneurs to carve out a place for themselves
6
23.02.2018 S. Sukumar versus The Secretary, Institute of Chartered Accountants of India and Hon’ble High
Court of Delhi in 2024 in W.P.(C) 11944/2021 & CM APPL. 12020/2024 etc.
7
03.07.2024 W.P.(C) 11944/2021 & CM APPL. 12020/2024 etc.
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in the world economy as well. In the backdrop of these developments, a need was
felt to help sustain this growth by putting in place a legal framework that would
enable the Indian corporate sector to operate in an environment of best
international practices in a globally competitive manner, while fostering a
positive environment for investment and growth.”
5.5 Standing Committee on Finance – 57th Report of 15 th Lok Sabha
“Salient features of the Companies Bill 2011 (Page 17)
The Authority shall consider the International Financial Reporting Standards and
other internationally accepted accounting and auditing policies and standards
while making recommendations on such matters to the Central Government which
will improve the competitiveness of our companies with other companies. The
Authority is also proposed to be empowered with quasi judicial powers to ensure
independent oversight over professionals.”
5.6 Recommendations of the Company Law Committee, March 2022
(a) The Company Law Committee, 2022, which was chaired by the then Secretary,
Corporate Affairs, GOI, and had members drawn from corporate sector, professionals, law
and public policy, amongst its deliberations also held that the auditor of a holding company
should comment on the true and fair view of each subsidiary company.
(d) The report states that the Committee discussed the issue of large number of cases of
diversion of funds through subsidiary companies that are presently taking place and
expressed the need for regulatory changes on this matter. The Committee viewed that since
a holding company makes significant investment in its subsidiary companies, there should
be proper oversight, especially on financial matters, of such subsidiary companies by the
Board and the auditor of the holding company. The Committee was also i nformed about
the existing auditing standards and practices. The Committee was of the view that suitable
amendments may be required to ensure that the auditor of the holding company has been
given assurance about the fairness of audit of each subsidiary company by the respective
auditors. In addition, the auditor of the holding company may also be empowered to
independently verify the accounts or part of accounts of any subsidiary company. The
Committee stated that suitable amendments concerning these matters may be introduced
after further examination and public consultation.
6. Provisions in law relevant to the proposal

6.1 In India, preparation of and audit of annual financial statements of all companies is mandatory.
S. 129 (3) of CA 2013 requires the company which has subsidiaries or associates to prepare
Consolidated Financial Statements (CFS) in addition to its Separate Financial Statements under
s.129 (1) and lay it before the annual general meeting of the company. S.143 (2) requires the
auditor to audit every financial statement laid before the company in its general meeting.
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6.2 S.143 of CA 2013 also deals with audit of branch office of a company either by the auditor of
the company or any other person8 qualified to be to be an auditor of a company and appointed
as such u/s 139 of CA 2013. Further, proviso to s.143 (1) empowers the auditor of a company
to right of access to the records of all its subsidiaries and associate companies in relation to
audit of CFS. S. 143 (3) (c) of CA 2013 states that the auditor’s report shall also state whether
the report on the accounts of any branch office of the company audited under sub-section (8)
by a person other than a company’s auditor has been sent to him under the proviso to that sub-
section and the manner in which he has dealt with it in preparing his report. Proviso to s.
143 (8) states that the branch auditor shall prepare a report on the accounts of the branch
examined by him and send it to the auditor of the company who shall deal with it in his report
in such manner as he considers necessary.
6.3 The provisions in CA 1956 were also similar, which are also referenced as SA 600 is of 2002
vintage. With respect to branch audits, s. 228 (3) (c) of CA 1956 stated that the branch auditor
shall prepare a report on the accounts of the branch office examined by him and forward the
same to the company's auditor who shall in preparing the auditor's report, deal with the same in
such manner as he considers necessary. Section 227 (3) of CA 1956 deals with the contents of
an audit report. S.227 (3) (bb) states that the auditor has to report on ‘whether the report on the
accounts of any branch office audited under section 228 by a person other than the company's
auditor has been forwarded to him as required by clause (c) of sub-section (3) of that section
and how he has dealt with the same in preparing the auditor's report’.
7. Key aspects of SA 600 which are at variance with ISA 600 (2002) and with provisions in
law
7.1 SA 600 was issued by the ICAI in April 1995 and revised in September 2002. This revised
version is stated to be generally consistent, in all material respects, with ISA 600 (2002).
However, the SA 600 is different even from ISA 600 (2002) in significant aspects, as discussed
below.
(i) Degree of Responsibility of the Principal Auditor vis a vis the Component Auditor
7.2 Division of responsibility was not a given in ISA 600 (2002); it was conditional. ISA 600
(2002) stated that division of responsibility can arise if the local regulations of some countries
permit a principal auditor to base the audit opinion on the financial statements taken as a whole
solely upon the report of another auditor regarding the audit of one or more components.
7.3 NFRA’s review of the provisions in both the Acts i.e., current CA 2013 Act9 & erstwhile CA
1956 Act10, shows that the Acts do not require the Principal Auditor to issue his audit opinion
solely based on the audit report of the branch auditors (See para 4.2 and 4.3 above).
7.4 SA 600 further provides that when the auditor delegates work to assistants or uses work
performed by other auditors and experts, he will continue to be responsible for forming and
expressing his opinion on financial information. However, he will be entitled to rely on work
8
In the case of foreign branch, it can be audited by an accountant or any other person duly qualified to act as an
auditor of that branch in accordance with the laws of that foreign country.
9
s. 143 (8) and s. 143 (3) (c) of CA 2013 and Rule 12 of the Companies (Audit and Auditor) Rules 2014
10
s. 228 (3) (c) and s.227(3)(bb) of CA 1956
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performed by others, provided he exercises adequate skill and care and is not aware of any
reason to believe that he should not have so relied. It states that the principal auditor would
not be responsible in respect of the work entrusted to the other auditors, except in
circumstances which should have aroused his suspicion about the reliability of the work
performed by the other auditors.
7.5 The exception clauses provided for in the Standard, as given above in bold italics above, left a
lot of discretion at the hands of the Principal Auditor and even in cases where components
auditors reported fraud and issues related to going concern, Principal Auditors have tried to take
shelter behind these clauses.
7.6 Hence, the Standards are required to be updated to bring in clarity in auditors’ other obligations
with respect to audit of Group entities.
(ii) Assessment of Professional Competence of the Other Auditor
7.7 Assessment of competence is hinged in SA 600 on the other auditor also being a CA. The SA
states that the principal auditor should consider the professional competence of the other auditor
in the context of a specific assignment if the other auditor is not a member of the ICAI.
7.8 Competence and capability encompass not just being a CA, but relevant experience,
understanding and adhering to quality control framework, ethical considerations, amongst other
competencies. Internationally11 also CPAs and such other professionals need to fulfil certain
criteria that are laid down by the audit regulators in their countries (as seen in the US, UK,
South Africa, Australia, Singapore etc) and must demonstrate competencies relevant to audit of
PIEs, in addition to registration with the audit regulator.
7.9 Today as well, while qualification of CA is an eligibility condition for being appointed as an
auditor, RBI, SEBI, IRDAI and CAG provide for other additional criteria like sectoral
experience of firms, existence of specific skills sets, number of audit partners and their
experience, presence of information system auditors in audit teams, etc., as part of the
empanelment/selection criteria for auditors, as illustrated below.
a) Prudential Regulator for Banks and Financial Institutions viz. RBI, has laid
down certain eligibility criteria such as minimum number of partners/professional staff,
past experience of bank audits, standing of the firm, IS auditing skills etc.
b) Capital Market Regulator viz. SEBI, requires the statutory auditor of listed
entity to be mandatorily subject to a peer review process of the ICAI and hold a ‘Peer
Review’ Certificate issued by the Peer Review Board of the ICAI (this is a case of a
CA reviewing the work of another CA)
c) Prudential Regulator for Insurance Entities viz. IRDAI, has also laid down
certain eligibility criteria such as minimum number of partners/professional staff, past
experience of bank audits, standing of the firm etc.
11
As an example, Australia’s competency standard can be viewed at
https://download.asic.gov.au/media/3913960/auditing-competency-standard-final-august-2015.pdf.
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7.10 In fact ISA 600 (2002) provided that even in the case when the principal auditor and other
auditor are from affiliated firms, reliance on the competence of the other auditor was premised
on some formal mechanisms, where ‘the principal auditor and the other auditor may have a
continuing, formal relationship providing for procedures such as periodic inter-firm review,
tests of operating policies and procedures and review of working papers of selected
audits.’
(iii) Sharing of work papers
7.11 SA 600, as it exists today, does not permit review of work papers of component auditors by the
principal auditor. Such review of work papers was part of the provisions in the then international
standard (ISA 600 of 2002) as it is an important enabling provision for the group auditor to
assess sufficiency of audit work performed by component auditors in support of the audit
opinion expressed on the group financial statements, given the risks that present in case of such
companies.
7.12 One of the reasons cited by ICAI in respect of why ISA 600 is not adopted in India is that the
Standard requires sharing of work papers between auditors, and sharing of work papers is not
permitted in Chartered Accountants Act 1949. In this regard the relevant provisions are as
below.
a) Clause (1) of the Second Schedule of the Act, PART I, Professional misconduct in relation
to Chartered Accountants in Practice -states that a Chartered Accountant in Practice shall
be deemed to be guilty of professional misconduct, “if he discloses confidential
information acquired in the course of his professional engagement to any person other than
his client so engaging him, without the consent of his client or otherwise than as required
by any law for the time being in force”.
b) This clause is not a bar to sharing work papers as SAs would be notified by the Government
under s.143 (10) of CA 2013. At present too, the SAs issued by the ICAI have statutory
status under s.143 (10) of CA 2013.
7.13 In respect of this issue, it is para 2.15.1.1 (v) of Code of Ethics (Revised 2020) issued by ICAI
states that an auditor is not required to provide the client or the other auditors of the same
enterprise or its related enterprise such as a parent or a subsidiary, access to his audit
working papers. The main auditors of an enterprise do not have right of access to the audit
working papers of the branch auditors. In the case of a Company, the statutory auditor has to
consider the report of the branch auditor and has a right to seek clarifications and/or to visit
the branch if he deems it necessary to do so for the performance of the duties as auditor. An
auditor can rely on the work of another auditor, without having any right of access to the audit
working papers of the other auditor. For this purpose, the term ‘auditor’ includes ‘internal
auditor’.
7.14 These provisions are not consistent with CA 2013. Instead, as discussed in paras above, the
principal auditor has right of access to all records that aid him in fulfilling his responsibility
under section 143 of CA 2013 (s.227 of CA 1956).
7.15 Provisions regarding review of work papers are essential for overall quality of audit and investor
protection and aid the principal auditor in seeking sufficient and appropriate evidence of work
done by branch auditors, in support of the principal auditor’s overall opinion on the financial
statements.
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8. Basis for revision of ISA 600- IAASB12- paramountcy of public interest issues
8.1 Internationally, the standard on use of Other Auditor’s work was issued four decades ago in July
1981 by the International Auditing Practices Committee, the predecessor of the IAASB. It was
known as ‘International Auditing Guidelines13 (IAG) 5, Using the Work of an Other Auditor.14
In 2002, the IAASB renamed it as ISA 600, Using the Work of Another Auditor.
a) As part of Clarity Project, new standard on group audits viz. ISA 600, Special
Considerations—Audits of Group Financial Statements (Including the Work of Component
Auditors) was developed and issued in 2009. Reportedly, it was developed in the wake of
several significant frauds that involved multinational groups of companies, audited by multiple
accounting firms15.
b) The IAASB’s project to revise the Standards began in 2015-16 when the feedback to IAASB
Work Plan 2015-16 indicated issues and concerns relating to application of the ISA as well as
auditor’s performance. The concerns raised are summarised below16.
- Application in case of Letter box audits (Companies incorporated in one jurisdiction
but all operations in other country), situation where access to information is restricted
(associates, joint ventures) and where shared services centres are used.
- Auditors’ Performance in relation to the extent of the group auditor’s involvement in
the work of the component auditor, communication between the group auditor and the
component auditor, application of the concept of component materiality and
identification of a component in complex situations.
- Inspection findings by audit regulatory bodies and audit oversight bodies have
consistently highlighted issues with respect to firms’ quality control, and audits of
group financial statements. The International Forum of Independent Audit Regulators
(IFIAR) 2015 Survey of Inspection Findings continues to identify matters relating to
Group Audits and Quality Control as areas with higher numbers of inspection findings
on public interest entities (PIE) audits (including but not limited to adequacy of
supervision and review and engagement quality control reviews).17
8.2 The project of ISA 600 (Revised) was undertaken to:

a) Clarify the scope of the standard, including explaining whether ISA 600 (Revised)
applies to shared service centres, non-controlled entities and entities with branches or
division;
12
https://www.iaasb.org/consultations-projects/group-audits-isa-600
13
In 1990-91, the title of IAPC auditing pronouncements changed from International Auditing Guidelines to
International Standards on Auditing to give more authoritative to the auditing standards. Refer footnote 55.
14
Page 10 of The IAPC’s International Auditing Guidelines and its controversial IAG 13 on the auditor’s report
by Stephen A. Zeff
15
Refer page 10 Evolution of Auditing Practice at Accounting Firms, PCAOB Release No. 2022-02 June 21,2022
Planning and Supervision of Audits Involving Other Auditors and Dividing Responsibility for the Audit with
Another Accounting Firm
16
Refer page 54 of the IAASB Invitation to Comment, Enhancing Audit Quality in the Public Interest: A Focus
on Professional Skepticism, Quality Control and Group Audits (Dec. 2015)
17
Refer para 5 of IAASB (Main Agenda 2016) ENHANCING AUDIT QUALITY: PROJECT PROPOSAL FOR
THE REVISION OF THE IAASB’S INTERNATIONAL STANDARDS RELATING TO QUALITY
CONTROL AND GROUP AUDITS
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b) Clarify the interaction of ISA 600 (Revised) with other ISAs, including ISA 220
(Revised), ISA 315 (Revised 2019) and ISA 330;
c) Clarify how to address restrictions on access to people and information in a group audit,
including restrictions on access to component management, those charged with
governance of the component, component auditors, or information at the components;
d) Clarify how the concepts of materiality and aggregation risk apply in a group audit;
e) Strengthen the auditor’s approach to planning and performance of a group audit by
closer aligning the standard to the principles in ISA 315 (Revised 2019);
f) Enhance the documentation requirements by clarifying what the group auditor may
need to document in different situations;
g) Emphasize the importance of professional skepticism in a group audit; and
h) Reinforcing the need for robust communication and interactions during the audit.
8.3 The IAASB stated that it was mindful that the standard needs to be scalable and adaptable to a
variety of circumstances. In light of the evolving and increasingly more complex environments
and ongoing implementation challenges in applying these standards, IAASB concluded that
taking action on the topics of quality control and group audits would therefore be in the public
interest. In 2015, IAASB undertook projects to address revisions of ISQC 1, ISA 220 and ISA
600, and consideration of other outputs as necessary, on a priority basis. A combined project
proposal for quality control and group audits was developed because of the intrinsic links and
crossover issues, at both the firm and engagement level, and also because of the interaction
between management of quality at the firm level (i.e., ISQC 1) and at the engagement level
(i.e., ISA 220).
8.4 The most significant public interest issues sought to be addressed included:
a) Fostering an appropriately independent and challenging skeptical mindset of the
auditor―professional skepticism is a fundamental concept and core to audit quality.
b) Enhancing documentation of the auditor’s judgments
c) Keeping the ISAs and ISCQ 1 fit for purpose
d) Encouraging proactive management of quality at the firm and engagement level―
ISQC 1 and ISA 220
e) Exploring transparency and its role in audit quality― how firms provide transparency
about how they support and achieve effective quality management.
8.5 The IAASB also explored what more can be done in ISA 600 in relation to component
materiality and the concept of aggregation risk. ISA 600 (Revised) defines Aggregation Risk
as follows: Aggregation risk exists in all audits of financial statements but is particularly
important to understand and address in a group audit because there is a greater likelihood that
audit procedures will be performed on classes of transactions, account balances or disclosures
that are disaggregated across components. Generally, aggregation risk increases as the
number of components increases at which audit procedures are performed separately,
whether by component auditors or other members of the engagement team.
International Adoption
8.6 Pursuant to the issue of ISA 600 (Revised) by IAASB, major jurisdictions across the globe
(UK, EU-almost all of its member states, South Africa, Australia, New Zealand, Brazil, Canada,
Malaysia and Singapore) have adopted/converged with ISA 600 (Revised) (refer annex 4). In
the US as well, the Public Company Accounting Oversight Board (PCAOB),which issues
Auditing Standards applicable to PIEs in the US, provides for Auditing Standard AS 1201-
Supervision
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of the Audit Engagement, in which the lead auditor supervises the work of the other auditor.
Very recently, it has approved additional provisions for division of responsibility through
bringing in a Standard AS 1206, which in their note18 applies to infrequent and uncommon
situations, such as for an equity method investment or a late-year acquisition of a company
audited by another auditor. This standard, AS 1206, is a choice given to the lead auditor in the
uncommon situations cited above, but even that is based on certain significant determination
involving qualitative and quantitative attributes, including a determination which states that ‘In
addition, in an audit that involves referred-to auditors (see AS 1206), the participation of the
engagement partner’s firm ordinarily is not sufficient for it to serve as lead auditor if the
referred-to auditors, in aggregate, audit more than 50 percent of the company’s assets or
revenues’ (details can be seen using link in footnote 18).
9. Consultation with SEBI, RBI and CAG and their in-principle agreement
9.1 SEBI, while conveying their in-principle agreement, stated that CA 2013 recognised the need
for having an independent audit regulator for improving the quality of accounting and audit in
India. The standards issue by independent audit regulators which are aligned with international
standards would lead to improvements in regulatory framework governing audit firms and
associate de ethical requirements, therefore leading to better quality audits of financial
statements of listed entities. SEBI stated that given inherent deficiencies in SA 600 as pointed
out in NFRA letter, it is crucial to update and bring the Indian Standard (SA 600) on par with
global standards (ISA 600). SEBI cited relevance of provisions in ISA 600 to even limited
review of the audit of entities/companies whose accounts are to be consolidated with the listed
entity in accordance with the SEBI (LODR) regulations 2015 and SEBI Master Circular dated
July 11, 2023.
9.2 RBI stated that they agree in principle with NFRA’s proposal to revise SA 600 in line with
international standards. RBI’s feedback is also presented in para 12.7 below. CAG suggested
wide stakeholder consultation and a graded approach in alignment of SA 600 with ISA 600
(Revised).
10 Discussion on apprehension of concentration of audit
10.1 Though the revisions are intended with overall public interest in view and with a view to
close the observed regulatory gaps and loopholes, some concerns have been raised that in
the application of the provisions of these standards, the principal auditors may potentially
insist that their network entities be appointed as auditors of significant components , thereby
leading to concentration of audit in select audit firms.
10.2 This is not an observed phenomenon and this line of thought undermines the right of
the shareholders to appoint auditors or the role of the Audit Committees in the
appointment of the auditors, as provided in Companies Act.
10.3 The apprehension that the revision in the Standards will lead to any kind of
concentration is already mitigated in Law. As per s.139 of CA 2013, the right of
appointment of auditors vests with the shareholders. CA 2013 also entrusts the Audit
Committees, under s.177, with making considered recommendations for appointment,
remuneration and terms of appointment of auditors of the company, reviewing and
monitoring auditor‘s independence and performance, and effectiveness of audit process.
18
https://pcaobus.org/about/rules-rulemaking/rulemaking-dockets/docket-042-proposed-amendments-
relating-to-the-supervision-of-audits-involving-other-auditors-and-proposed-auditing-standard
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Section 141 (3) (g) of CA 2013 places a bar on a Chartered Accountant from being
appointed auditor if the auditor is holding appointment as auditor of more than twenty
companies at the date of appointment or reappointment. Further, as per clause 8 of the ICAI
Council Guidelines 2008 19 there is ceiling of 30 company audits, whether in respect of
private companies or other Companies excluding one person and dormant companies, per
Chartered Accountant or per Partner in the firm.
10.4 Moreover, the apprehension that this proposal may impact small and medium
accounting and auditing firms on a large scale does not appear to be supported by
any relevant data. On the contrary, the data obtained from CMIE and NSE, as
explained below, suggests that any such apprehension is misplaced.
The proposed revisions are to be applied to listed entities and PIEs under Rule 3 of NFRA
Rules 2018, except Public Sector Banks, Public Sector Enterprises, Public Sector Insurance
Companies and their subsidiaries respectively. At present, Rule 3 entities are audited by
approximately 2500-3000 audit firms of whom 60-70 are big, medium sized audit firms and
the majority are sole propreitorships or very small audit firms auditing one or two of these
Public Interest Entities. Rule 3 entities itself comprise approximately 7850 companies,
excluding PSBs and PSUs (source CMIE database).
A broad assessment of the number of subsidiaries and JVs etc of listed entities and unlisted
entities in NFRA purview (excluding PSBs and PSUs), are approximately 24469 (CMIE
data). This figure translates to approximately 1.5 percent of the total active companies
which approximate 17,45,911 lakh (ref July 2024 bulletin of the Ministry of Corporate
Affairs) which are required to be audited. Data from NSE (which sources data from MCA
21 and as available with NSE), states the number of listed holding companies and their
subsidiaries/JVs/associates (listed and unlisted), is approximately 17,540. Therefore, the
total number of entities under the NFRA domain and their subsidiaries (approximately)
together account for only about 1.8% of the total active companies in the country.
Therefore, the above data from CMIE and NSE indicates that the proposed SA 600
(Revised) may impact a maximum of around 2 percent of the total approx. 17 lakh active
companies, and the audit of around 98% of the companies may not be impacted by the
revision in the Standard. In other words, there may not be any significant impact on the
number of audits done by the small and medium audit firms. Therefore, the above data
should put to rest any apprehension of audit concentration.
10.5 It is also relevant to recollect that the SA 220 already requires that the engagement partner
shall be satisfied that the engagement team, and any auditor’s experts who are not part of
the engagement team, collectively have the appropriate competence and capabilities to:
(a) Perform the audit engagement in accordance with professional standards and
regulatory and legal requirements; and
(b) Enable an auditor’s report that is appropriate in the circumstances to be issued .
10.6 It is therefore logical and necessary that the same requirements of competency are present
and evidenced in large mutilocation, multinational audits and the audit quality
requirements are commensurate with the risks involved. The proposed revision reiterates
19
Refer page 154-156 of Code of Ethics -Volume II (Revised 2020)
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requirements of SA 22020 and SA 31521 in respect of Group Audits and consequently the
obligations and role of Principal Auditors. It cannot be the case that skill, competency and
audit effort be commensurate with the audit of smaller subsidiaries or associates but are
permitted to be diluted in case of large complex entities that carry a higher risk of audit
failures which can have a cascading effect on other sectors of the economy.
While it is expected that to undertake audit of large multi-location multinational companies
and big corporations, there is a need for audit firms to operate with institutional capacity
and required competency, it also does not seem appropriate to assume that the requirement
of quality will stifle capacity and opportunity. In fact, it has the potential to foster growth,
innovation and synergies in audit capacity, promote a natural coming together of talent, and
elevate quality of audit.
10.7 In view of the above and in view of the significant public interest , the revision in SA
600 is sought to be brought in for audits of Listed companies and Public Interest
Entities covered in Rule 3 of NFRA Rules 2018, except Public Sector Enterprises, Public
Sector Insurance Entities and Public Sector Banks and their branches.
11. Public Consultation and Request for Comments
The proposed revised Standard can be accessed at link below:

https://cdnbbsr.s3waas.gov.in/s3e2ad76f2326fbc6b56a45a56c59fafdb/uploads/2024/09/20
2409171313688475.pdf
Key aspects of the proposed changes are also indicated in annex 5. Comments are requested on
the proposed revisions. NFRA also requests views/comments of stakeholders on specific
questions mentioned below in relation to the key issues mentioned above.
The revisions being proposed are to be applied to audits of PIEs that fall under Rule 3 of NFRA
Rules 2018, except Public Sector Enterprises, Public Sector Insurance Companies, Public
Sector Banks and their respective branches. Comments will be most helpful if they identify
and clearly explain the issue or question to which they relate and are supported by empirical
data and a clear rationale. Those who disagree with a proposal are requested to describe their
suggested alternative(s), supported by specific reasoning and examples, as far as possible. Last
date to receive comments is 30 October 2024.
Question Particulars
No.
1 This consultation paper provides a discussion of the reasons and benefits of
improving auditing standards on audit of Group Financial Statements. Are there
additional concerns or aspects that NFRA should seek to address or consider?
2 Is the proposed draft solution, SA 600 (Revised), in view of the risks and benefits
outlined above? If not, why not, and are there any alternative approaches?
3 As the proposed SA 600 (Revised) converges with ISA 600 (Revised), application
guidance is already available. However, are there any particular areas of the
20
SA 220- Quality Control for an audit of financial statements.
21
SA 315 Identifying and Assessing the Risk of Material Misstatement Through Understanding the Entity and
Its Environment
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Question Particulars
No.
proposed SA 600 (revised) where more clarifications, application material and
guidance will be needed?
4 Are there any other conforming or consequential amendments required in any
other SAs, apart from those mentioned in the draft SA 600 (Revised), put out for
public consultation?
5 The current proposal is to apply the revised requirements to audits of PIEs under
Rule 3 of NFRA Rules 2018, except Public Sector Banks, Public Sector Insurance
Companies, PSUs and their respective branches. What could be specific
considerations in case of PSBs/PSUs/Pubic sector insurance companies and their
branches that would need to be addressed going forward?
The comments may be sent at:
Email [email protected] captioned “Comments on proposed SA 600

(Revised)”
Postal Captioned “Comments on proposed SA 600 (Revised)” to
Secretary, National Financial Reporting Authority
7th-8th Floor, Hindustan Times House,
18-20, Kasturba Gandhi Marg, New Delhi 110001.
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Annex 1
NFRA’s experience in enforcement cases-Group Audits
(a) DHFL, a Non-Banking Finance Company, was allegedly involved in siphoning off of approximately
₹ 34,000 crore of public money by the promoter directors, reportedly through the use of a fictitious
branch. DHFL operated through a network of around 250 branches across various States in India.
NFRA’s investigation revealed that the Principal Auditor (i) did not identify non-consolidation of a
subsidiary resulting in an understatement of liability by ₹1901 crore in the consolidated financial
statement, (ii) did not identify deficiencies in internal control relating to the most critical activity of a
financial institution i.e., appraisal and sanction of loans at the head office level and branch level, (iii)
failed to understand the entity’s operating structure, group-wide internal control, and (iv) did not
perform adequate audit procedures in the identification, assessment and conclusions of Risk of Material
Misstatement (RoMM), (v) failed to verify the Related Party Transactions (RPT), and more importantly
did not identify the components to be audited. The audit opinion issued by him was therefore without
sufficient basis. The Principal Auditor did not assess the legal validity of the appointment of the large
number of branch auditors upon whose work he relied upon. The work done by the branch auditors,
which were many22, was similarly found deficient in application of auditing standards.
(b) The IL&FS group, which consisted of around 250 subsidiaries (listed as well as unlisted),
associates and joint ventures as on 31st March 2018, operated in the infrastructure sector. As per books
of accounts, the group’s revenue was around ₹17,672 Crore with total assets of ₹115,814 Crore and
total external liabilities of ₹106,543 Crore as on 31 March 2018. It reported a net loss of ₹1886 Crore
(consolidated) and a profit of ₹584 crore (standalone) for the said period. The audit quality reports in
respect of IL&FS, ITNL and IFIN have been published on NFRA website. Significant key
observations by NFRA relevant to this discussion included inadequate coordination/discussion with
component auditors at most stages of audit, discrepancies in the number of components as per CFS and
mandatory filings in MCA 21 which were not assessed by the auditors, non-assessment of inclusion of
unaudited financial statements of some components in the CFS by Management. In respect of the latter,
the principal auditor stated that “…….. preparation of consolidated financial statements (CFS) is the
responsibility of management and accordingly, use of component’s unaudited financial statements,
considering the non-availability of audited financial statements, was also decision of management. As
an auditor, we had no role to play in this regard. As a holding company auditor, it is not in our realm
to insist on the management that all components financial statements should be audited”.
(c) SEBI had referred a case to NFRA of a company that had filed false declarations with Registrar
of Companies, Hyderabad (‘RoC’ hereafter) in respect of its turnover. The company was neither
registered by the Service Tax/GST department nor had filed any Service Tax or GST Returns and yet
the auditor had certified such financial statements. The company had disclosed in its annual reports that
they were engaged in the Software business, when it was in the business of construction. 100 % of the
revenue of the company was being generated from its foreign branch for which an auditor was appointed
who was based in a third country. NFRA’s examination revealed that there were significant violations
in the financial statements with respect to revenue recognition policy, disclosures and foreign currency
translations, no evidence of audit procedures performed by the principal auditor to conclude that the
22
NFRA took disciplinary action against approx. 30 branch auditors involved in over 200 branch audits
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work of the foreign branch auditor was in line with instructions conveyed by him. Responding to the
charges, the principal auditor referred to the ICAI Code of Ethics and stated that —“...The main
auditors of an enterprise do not have right of access to the audit working papers of the branch
auditors. In the case of a Company, the statutory auditor has to consider the report of the branch auditor
and has a right to seek clarifications and/or to visit the branch if he deems it necessary to do so for the
performance of the duties as auditor……... Hence, from the above it can be inferred that appropriate
procedures within the framework have been performed by us and there is no non-compliance.”
In another instance the principal auditor stated that “…sampling in audit is matter of professional
judgment as a parent auditor we had informed about the significant risks and materiality in the
instructions which were sent to the branch auditor, the review and audit, sampling was carried out by
the branch auditor with regards to each financial captions of the branch.....It must be noted that we had
received an audited financial statement from the auditor in ….(foreign branch auditor), that audit report
does not contain any negative remarks about the balances under question. We, being the parent
auditor, relied on the audit report sent by the Branch Auditor and that was well within the
purview of the standards of auditing and Companies Act, 2013. There is no breach of any Standards
of Auditing or any Law for the time being in force. Further, it also must be noted that the audit evidence
collected by the branch auditor, will be with the branch auditor, they cannot be found in the audit file
of parent auditor.’
(d) Reliance Commercial Finance (RCL) Limited- As per the Consolidated Financial Statements for
FY 2018-19, RCL had loans from Banks of around ₹12,000 crore and other external borrowings of
around ₹32,000 crores, consisting of debentures, commercial papers and pass-through certificates. RCL
was a Core Investment Company (CIC) investing primarily in its group companies. RCL used the above
loans and borrowing to extend loans and investments to other group companies. Reliance Home Finance
Limited (RHFL) and Reliance Commercial Finance Limited (RCFL) are subsidiaries of Reliance
Capital Limited (RCL), which are consolidated in the financial statements of RCL. One of the joint
auditors of RCL reported suspected fraud regarding loans and investments amounting to approximately
₹12,571 crore. Despite the reporting of suspected fraud and the resignation by the joint auditor who
reported fraud, the other Joint Auditor did not perform adequate procedures as required by the SAs. The
material misstatements in the financial statements due to inadequate provision, unjustified valuation of
loans and irrational business practices were concurred by them. All three companies were facing going
concern issues and suspected fraud. While the RHFL auditor had qualified its report, the RCFL auditor
had issued a clean report with a paragraph on going concern. The RCL auditor, who was the principal
auditor, simply quoted these two reports of the component auditors and then issued an unmodified
opinion on the standalone financial statements and a qualified opinion on consolidated financial
statement, basing his conclusion on the RHFL's modified opinion alone.
(e) Coffee Day Enterprises Limited (CDEL)- In respect of Audit of CFS of CDEL, the audit firm, the
engagement partner (EP) and the Engagement Quality Control Partner (EQCR), did not perform
appropriate additional audit procedures to obtain sufficient appropriate audit evidence to issue audit
opinion on CFS. Though a substantial portion of financial information of the CFS was audited by the
Other Auditors, the Principal Auditors did not properly evaluate whether their own participation was
sufficient to be able to act as the Principal Auditor. The Auditors sought refuge in the provision of SA
600, relying on the work of auditors of the subsidiaries, while CDEL’s investments in the subsidiaries
of this company constituted a staggering figure of Rs 1,937 crores constituting 89% of the standalone
balance sheet.
The additional procedures, wherever performed by the Principal Auditors, were also inadequate and
deficient. The business rationale of unusually high amount of Rs 2,226 crores of the loans/advances
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given to a promoter-controlled entity which had no business connection with the listed company was
not evaluated. CFS had Rs 842.49 crores of outstanding amounts receivable from this promoter held
entity, a related party with very minimal business activities, but the Principal Auditors did not evaluate
recoverability and the adequacy of the impairment allowance as per the applicable accounting
standards; there was a pattern of diversion of funds of the listed entity, to promoters or entities controlled
by the promoters through a web of intra group circular transfer of funds where the promoter held entity
was used as a main conduit for transferring funds to promoter controlled entities. SA 600 provides that
principal auditor would normally be entitled to rely upon the work of component auditors unless there
are special circumstances to make it essential for him to visit the component and/or examine the books
of accounts and other records of the said component. While NFRA noted that the company had diverted
large amounts to its promoter entity (upwards of Rs 3500 crores) and the auditor had himself identified
the matter of exposure of the group companies to the promoter company and recoverability of
outstanding balances at year end as an important matter, the auditor stated that he relied upon the work
of component auditors as ‘no such special circumstances came to his attention to trigger the
requirement of SA 600’
On non-reporting of fraud, the Principal Auditor stated that ‘they had no obligation to evaluate the fraud
risk in any of the group companies’ and ‘they had no access to the books of the subsidiaries audited by
the other auditors’. On evergreening of loans, they stated that while various transactions were noted
between the group companies there was no evergreening in the company they audited.
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Annex 2
Group Legal Entity Structure Overview of Top 100 Listed Companies
(Source: Notes to Consolidated Financial Statements 31.03.2023)
Sr. Company name Category Total Total Total Total Total

No. based on Subsidiaries, Subsidiarie Associates JVs Overseas
Market JVs & s Subs, JVs
Cap Associates &
Associates
1 RELIANCE INDUSTRIES LTD Large Cap 335 277 22 36 88
TATA CONSULTANCY
2 SERVICES LTD. Large Cap 52 52 0 0 46
3 HINDUSTAN UNILEVER LTD., Large Cap 15 14 0 1 2
4 INFOSYS LTD Large Cap 98 98 0 0 94
5 ITC LTD Large Cap 41 29 8 4 12
6 BHARTI AIRTEL LTD. Large Cap 150 139 6 5 134
7 LARSEN & TOUBRO LIMITED Large Cap 113 94 5 14 54
8 HCL TECHNOLOGIES LTD Large Cap 124 124 0 0 115
9 ASIAN PAINTS LTD. Large Cap 27 24 3 0 18
10 MARUTI SUZUKI INDIA LTD. Large Cap 19 2 14 3 0
11 TITAN COMPANY LIMITED Large Cap 10 9 1 0 6
12 ADANI ENTERPRISES LTD. Large Cap 216 184 13 19 58
SUN PHARMACEUTICAL
13 INDUSTRIES LTD. Large Cap 59 59 0 0 46
14 ULTRATECH CEMENT LTD Large Cap 14 6 7 1 3
AVENUE SUPERMARTS
15 LIMITED Large Cap 5 5 0 0 0
16 TATA MOTORS LTD. Large Cap 105 90 13 2 83
OIL AND NATURAL GAS
17 CORPORATION LTD Large Cap 70 35 14 21 38
18 NTPC LIMITED Large Cap 28 11 0 17 2
19 WIPRO LTD., Large Cap 66 65 1 0 57
MAHINDRA & MAHINDRA
20 LTD. Large Cap 124 96 12 16 49
POWER GRID CORPORATION
21 OF INDIA LIMITED Large Cap 54 42 0 12 1
ADANI PORTS AND SPECIAL
22 ECONOMIC ZONE LTD Large Cap 104 95 0 9 13
23 COAL INDIA LIMITED Large Cap 16 11 0 5 1
ADANI GREEN ENERGY
25 LTIMINDTREE LIMITED Large Cap 29 29 0 0 26
26 TATA STEEL LIMITED Large Cap 190 146 20 24 137
27 BAJAJ AUTO LIMITED Large Cap 7 7 0 0 5
JIO FINANCIAL SERVICES
HINDUSTAN AERONAUTICS
30 ADANI POWER LIMITED Large Cap 13 13 0 0 0
31 HINDUSTAN ZINC LTD., Large Cap 5 4 0 1 0
32 PIDILITE INDUSTRIES LTD. Large Cap 38 31 7 0 20
33 GRASIM INDUSTRIES LTD., Large Cap 26 8 6 12 6
34 TECH MAHINDRA LIMITED Large Cap 102 91 11 0 86
35 BRITANNIA INDUSTRIES LTD., Large Cap 32 25 6 1 14
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Cap Associates &
Associates
36 GAIL (INDIA) LTD. Large Cap 26 6 11 9 7
37 TRENT LTD [LAKME LTD] Large Cap 9 6 2 1 1
MACROTECH DEVELOPERS
39 POLYCAB INDIA LIMITED Large Cap 9 8 0 1 1
40 ADANI TOTAL GAS LIMITED Large Cap 4 2 0 2 0
41 TVS MOTOR COMPANY LTD. Large Cap 24 16 8 0 10
APOLLO HOSPITALS
42 ENTERPRISES LTD., Large Cap 26 20 4 2 2
43 REC LIMITED Large Cap 17 1 16 0 0
44 MANKIND PHARMA LIMITED Large Cap 40 32 5 3 4
45 MARICO LIMITED Large Cap 16 16 0 0 13
46 SRF LTD., Large Cap 4 4 0 0 1
47 JINDAL STEEL & POWER LTD Large Cap 89 83 2 4 61
48 BERGER PAINTS INDIA LTD Large Cap 11 8 0 3 4
SAMVARDHANA
MOTHERSON
49 INTERNATIONAL LIMITED Mid Cap 251 240 0 11 210
CG POWER AND INDUSTRIAL
50 SOLUTIONS LIMITED Mid Cap 19 19 0 0 15
ZYDUS LIFESCIENCES
51 LIMITED Mid Cap 45 45 0 0 30
52 JSW ENERGY LIMITED Mid Cap 65 63 1 1 8
TUBE INVESTMENTS OF
53 INDIA LTD Mid Cap 26 24 1 1 18
54 BOSCH LTD Mid Cap 5 2 2 1 0
MAX HEALTHCARE
55 INSTITUTE LIMITED Mid Cap 11 11 0 0 0
56 INDIAN HOTELS CO. LTD Mid Cap 42 27 6 9 12
57 PI INDUSTRIES LIMITED Mid Cap 8 6 1 1 1
ONE 97 COMMUNICATIONS
59 NHPC LIMITED Mid Cap 8 6 0 2 0
60 VODAFONE IDEA LIMITED Mid Cap 12 10 1 1 0
61 AUROBINDO PHARMA LTD. Mid Cap 80 71 2 7 59
62 ASHOK LEYLAND LTD., Mid Cap 18 13 3 2 6
63 ASTRAL LIMITED Mid Cap 7 4 2 1 2
64 BHARAT FORGE LTD Mid Cap 17 12 3 2 4
BALKRISHNA INDUSTRIES
65 LTD., Mid Cap 5 5 0 0 4
66 GODREJ PROPERTIES LIMITED Mid Cap 80 34 46 0 46
L&T TECHNOLOGY SERVICES
68 ADANI WILMAR LIMITED Mid Cap 6 3 0 3 0
69 M.R.F. LTD., Mid Cap 4 4 0 0 2
70 ADITYA BIRLA CAPITAL LTD Mid Cap 20 17 3 0 0
BHARAT HEAVY
71 ELECTRICALS LTD., Mid Cap 4 1 0 3 0
PERSISTENT SYSTEMS
CONTAINER CORPORATION
73 OF INDIA LTD. Mid Cap 16 4 2 10 1
Page 21 of 35
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Cap Associates &
Associates
74 MPHASIS LIMITED Mid Cap 35 35 0 0 32
75 APL APOLLO TUBES LIMITED Mid Cap 6 6 0 0 2
76 OBEROI REALTY LIMITED Mid Cap 24 14 0 10 0
77 NMDC LTD Mid Cap 13 4 5 4 3
FSN E-COMMERCE VENTURES
HINDUSTAN PETROLEUM
79 CORPORATION LTD Mid Cap 20 4 3 13 1
80 DALMIA BHARAT LIMITED Mid Cap 33 30 1 2 0
STEEL AUTHORITY OF INDIA
81 LTD., Mid Cap 16 2 1 13 0
82 JINDAL STAINLESS LIMITED Mid Cap 14 12 2 0 4
83 SUZLON ENERGY LTD. Mid Cap 44 36 5 3 25
84 ACC LTD Mid Cap 8 4 2 2 0
85 TORRENT POWER LIMITED Mid Cap 17 17 0 0 0
86 UNO MINDA LIMITED Mid Cap 38 22 4 12 6
GMR AIRPORTS
87 INFRASTRUCTURE LIMITED Mid Cap 106 86 6 14 26
88 ESCORTS KUBOTA LIMITED Mid Cap 9 5 0 4 1
JUBILANT FOODWORKS
90 THE PHOENIX MILLS LTD., Mid Cap 41 36 5 0 0
91 KPIT TECHNOLOGIES LTD Mid Cap 23 22 0 1 21
L&T FINANCE HOLDINGS
93 AIA ENGINEERING LTD. Mid Cap 11 11 0 0 9
SONA BLW PRECISION
94 FORGINGS LIMITED Mid Cap 9 9 0 0 7
95 THERMAX LTD. Mid Cap 27 25 2 0 16
COROMANDEL
96 INTERNATIONAL LIMITED Mid Cap 15 15 0 0 11
97 COFORGE LIMITED Mid Cap 25 25 0 0 20
98 OIL INDIA LIMITED Mid Cap 14 6 1 7 7
GUJARAT
99 FLUOROCHEMICALS LIMITED Mid Cap 9 8 0 1 6
100 RAIL VIKAS NIGAM LIMITED Mid Cap 12 1 0 11 0
Page 22 of 35
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Annex 3
Extent of Participation/Responsibility of Component Auditors in a sample of top Listed

Companies
Source of Data: Independent Auditors Report and CFS for 31.03.2023

@ Amount of Assets $ Audited by Other Auditors/Total Assets x 100
# Amount of Revenue Audited by Other Auditors/Total Revenue from Operations x 100
Company name Category based % Net % Net % of assets % of

on Market Cap Assets of Assets of audited by Revenue
Parent Components Other audited by
Auditors@ Other
Auditors#
THE PHOENIX MILLS LTD., Mid Cap 41.52 58.48 98.59 61.95
ADITYA BIRLA CAPITAL LTD Mid Cap 63.96 36.04 97.36 100.49
COAL INDIA LIMITED Large Cap 3.73 96.27 94.71 104.88
BAJAJ FINSERV LIMITED (31.12.2023) Large Cap 11.31 88.69 90.98 75.19
ZYDUS LIFESCIENCES LIMITED Mid Cap 77.87 22.13 87.01 66.38
TATA MOTORS LTD. Large Cap 46.78 53.22 86.65 73.80
ADANI ENTERPRISES LTD. Large Cap 26.00 74.00 78.31 50.56
AUROBINDO PHARMA LTD. Mid Cap 66.71 33.29 69.50 65.97
TATA CHEMICALS LTD Mid Cap 39.7 60.30 67.97 54.33
SUN PHARMACEUTICAL
INDUSTRIES LTD. Large Cap 40.00 60.00 66.71 33.14
ASHOK LEYLAND LTD., Mid Cap 98.50 1.50 65.43 17.57
HINDALCO INDUSTRIES LTD. Large Cap 69.60 30.40 64.44 67.63
GRASIM INDUSTRIES LTD., Large Cap 37.53 62.47 63.53 27.16
MAHINDRA & MAHINDRA LTD. Large Cap 76.92 23.08 62.31 32.77
LARSEN & TOUBRO LIMITED Large Cap 80.08 19.92 56.65 24.35
OIL AND NATURAL GAS
CORPORATION LTD Large Cap 52.76 47.24 52.45 89.24
BHARAT FORGE LTD Mid Cap 114.22 -14.22 50.12 65.00
STEEL AUTHORITY OF INDIA LTD., Mid Cap 95.24 4.76 46.96 38.25
ADANI PORTS AND SPECIAL
ECONOMIC ZONE LTD Large Cap 29.95 70.05 42.38 21.02
OIL INDIA LIMITED Mid Cap 82.11 17.89 40.19 73.23
TVS MOTOR COMPANY LTD. Large Cap 4.64 95.36 39.08 21.56
CIPLA LTD., Large Cap 105.26 -5.26 37.55 18.34
AIA ENGINEERING LTD. Mid Cap 96.16 3.84 36.94 100.98
TATA STEEL LIMITED Large Cap 130.77 -30.77 34.17 41.36
APL APOLLO TUBES LIMITED Mid Cap 65.02 34.98 31.53 5.81
TUBE INVESTMENTS OF INDIA LTD Mid Cap 72.00 28.00 31.37 9.50
MANKIND PHARMA LIMITED Large Cap 104.69 -4.69 30.79 23.48
TECH MAHINDRA LIMITED Large Cap 89.88 10.12 28.40 32.42
MARICO LIMITED Large Cap 92.93 7.07 28.28 27.95
JIO FINANCIAL SERVICES LIMITED Large Cap 21.08 78.92 26.94 0.00
COFORGE LIMITED Mid Cap 17.55 82.45 26.10 8.39
CG POWER AND INDUSTRIAL
SOLUTIONS LIMITED Mid Cap 181.22 -81.22 25.75 7.86
Page 23 of 35
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Auditors@ Other
Auditors#
VARUN BEVERAGES LIMITED Large Cap 84.17 15.83 23.36 26.38

APOLLO HOSPITALS ENTERPRISES
LTD., Large Cap 106.02 -6.02 23.19 25.84
TORRENT PHARMACEUTICALS LTD. Large Cap 98.85 1.15 22.76 28.94
HINDUSTAN PETROLEUM
CORPORATION LTD Mid Cap 85.90 14.10 22.24 0.00
SRF LTD., Large Cap 90.00 10.00 21.38 19.39
DLF LIMITED Large Cap 74.84 25.16 20.32 17.78
RELIANCE INDUSTRIES LTD Large Cap 66.92 33.08 20.22 68.91
NHPC LIMITED Mid Cap 75.64 24.36 19.63 14.55
JINDAL STEEL & POWER LTD Large Cap 104.00 -4.00 19.55 9.62
BERGER PAINTS INDIA LTD Large Cap 96.18 3.82 19.54 11.36
ADANI POWER LIMITED Large Cap 147.00 -47.00 18.95 0.45
NTPC LIMITED Large Cap 92.01 7.99 18.85 8.72
PERSISTENT SYSTEMS LIMITED Mid Cap 77.79 22.21 18.74 11.75
JSW STEEL LIMITED Large Cap 54.99 45.01 18.56 14.99
KPIT TECHNOLOGIES LTD Mid Cap 83.19 16.81 18.53 15.79
FSN E-COMMERCE VENTURES
LIMITED Mid Cap 118.47 -18.47 18.43 11.06
ASTRAL LIMITED Mid Cap 98.82 1.18 18.41 10.62
PIDILITE INDUSTRIES LTD. Large Cap 82.24 17.76 17.52 10.64
INDIAN HOTELS CO. LTD Mid Cap 99.53 0.47 15.95 5.44
VEDANTA LIMITED Large Cap 172.00 -72.00 15.84 9.26
THERMAX LTD. Mid Cap 83.14 16.86 15.66 6.47
DALMIA BHARAT LIMITED Mid Cap 34.05 65.95 14.87 9.45
BIOCON LTD. Mid Cap 50.00 50.00 14.48 0.07
ASIAN PAINTS LTD. Large Cap 94.80 5.20 11.64 8.95
GAIL (INDIA) LTD. Large Cap 85.48 14.52 11.64 23.70
ONE 97 COMMUNICATIONS LIMITED Mid Cap 97.05 2.95 11.10 7.75
L&T TECHNOLOGY SERVICES
LIMITED Mid Cap 0.92 99.08 10.71 15.71
SUZLON ENERGY LTD. Mid Cap 1.29 98.71 10.64 3.18
POWER GRID CORPORATION OF
INDIA LIMITED Large Cap 92.57 7.43 10.33 5.20
BRITANNIA INDUSTRIES LTD., Large Cap 82.19 17.81 9.99 4.91
TATA POWER CO. LTD Large Cap 25.43 74.57 9.80 19.61
MAHINDRA & MAHINDRA
FINANCIAL SERVICES LIMITED Mid Cap 88.54 11.46 9.21 14.35
DR. REDDY'S LABORATORIES LTD., Large Cap 87.92 12.08 9.12 13.41
INDIAN OIL CORPORATION LTD. Large Cap 96.45% 99.04 8.74 10.86
JINDAL STAINLESS LIMITED Mid Cap 95.73 4.27 8.29 11.61
ITC LTD Large Cap 90.15 9.85 7.59 4.28
ADANI WILMAR LIMITED Mid Cap 97.00 3.00 7.09 5.35
ULTRATECH CEMENT LTD Large Cap 93.76 6.24 6.45 3.49
AJANTA PHARMA LTD. Mid Cap 97.1 2.90 5.97 9.77
Page 24 of 35
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Auditors@ Other
Auditors#
SIEMENS LTD., Large Cap 95.34 4.66 5.87 8.77

LTIMINDTREE LIMITED Large Cap 96.38 3.62 5.25 6.06
PI INDUSTRIES LIMITED Mid Cap 95.91 4.09 5.00 4.50
CONTAINER CORPORATION OF
INDIA LTD. Mid Cap 99.27 0.73 3.18 1.50
DIVI'S LABORATORIES LTD. Large Cap 99.19 0.81 2.99 6.64
COROMANDEL INTERNATIONAL
LIMITED Mid Cap 96.00 4.00 2.53 0.30
MACROTECH DEVELOPERS LIMITED Large Cap 98.80 1.20 2.28 0.43
TITAN COMPANY LIMITED Large Cap 94.97 5.03 2.27 0.98
BALKRISHNA INDUSTRIES LTD., Mid Cap 99.88 0.12 1.76 4.90
EICHER MOTORS LTD. Large Cap 84.03 15.97 1.61 2.69
TRENT LTD [LAKME LTD] Large Cap 115.66 -15.66 1.42 1.28
M.R.F. LTD., Mid Cap 98.64 1.36 1.42 1.89
ESCORTS KUBOTA LIMITED Mid Cap 103.08 -3.08 1.05 2.01
TORRENT POWER LIMITED Mid Cap 95.93 4.07 0.97 0.02
JUBILANT FOODWORKS LIMITED Mid Cap 105.27 -5.27 0.82 0.00
HINDUSTAN UNILEVER LTD., Large Cap 99.40 0.60 0.52 0.90
ACC LTD Mid Cap 99.84 0.16 0.47 0.01
AVENUE SUPERMARTS LIMITED Large Cap 98.33 1.67 0.41 0.29
MAX HEALTHCARE INSTITUTE
LIMITED Mid Cap 95.00 5.00 0.33 0.10
POLYCAB INDIA LIMITED Large Cap 98.54 1.46 0.32 0.28
SCHAEFFLER INDIA LIMITED Mid Cap 100.00 0.00 0.29 0.34
RAIL VIKAS NIGAM LIMITED Mid Cap 73.07 26.93 0.28 0.09
ADANI TOTAL GAS LIMITED Large Cap 99.77 0.23 0.16 0.00
REC LIMITED Large Cap 99.24 0.76 0.15 0.78
HAVELLS INDIA LIMITED Large Cap 100.00 0.00 0.13 0.25
OBEROI REALTY LIMITED Mid Cap 62.80 37.20 0.11 0.00
MARUTI SUZUKI INDIA LTD. Large Cap 97.72 2.28 0.07 0.08
HINDUSTAN AERONAUTICS
LIMITED Large Cap 99.42 0.58 0.07 0.05
PETRONET LNG LTD. Mid Cap 96.73 3.27 0.03 0.00
BOSCH LTD Mid Cap 100.00 0.00 0.00 0.00
HINDUSTAN ZINC LTD., Large Cap 100.08 -0.08 0.00 0.02
HCL TECHNOLOGIES LTD Large Cap 48.50 51.50 0.00 0.00
WIPRO LTD., Large Cap 60.20 39.80 0.00 0.00
DABUR INDIA LTD. Large Cap 66.59 33.41 0.00 0.00
UNO MINDA LIMITED Mid Cap 75.01 24.99 0.00 0.00
TATA CONSULTANCY SERVICES
LTD. Large Cap 76.39 23.61 0.00 0.00
ADANI GREEN ENERGY LIMITED Large Cap 77.00 23.00 0.00 0.00
INFOSYS LTD Large Cap 80.97 19.03 0.00 0.00
BHARTI AIRTEL LTD. Large Cap 101.84 -1.84 0.00 0.00
3M INDIA LTD. Mid Cap 148.00 -48.00 0.00 0.00
Page 25 of 35
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Annex 4
Adoption of ISA 600 internationally
Jurisdiction Title of Standard issued

EU EU Audit Regulations 2014 (Article 9) permits EU
Commission to adopt ISAs as per Article 26 of EU Directive
2006/43/EC. Currently, EU Commission has not adopted
ISAs but its Study Report of Oct 202223 indicate almost all
of its 28 members having adopted ISAs issued by the IAASB
which includes countries such as Belgium, Germany, Italy,
Ireland, Netherlands, Sweden,, Norway etc.
U.K. ISA (UK) 600 (Revised September 2022)
https://www.frc.org.uk/library/standards-codes-
policy/audit-assurance-and-ethics/auditing-standards/isa-uk-
600/
South Africa Since April 2006, IRBA has adopted the International
Engagement Standards issued by the IAASB, as published in
the successive IAASB Handbooks of International Quality
Control, Auditing, Assurance, and Ethics Pronouncements
https://www.irba.co.za/guidance-to-ras/technical-guidance-
for-auditors/auditing-standards-and-guides/handbooks-of-
international-standards
Australia ASA 600 Special Considerations—Audits of a Group

Financial Report (Including the Work of Component
Auditors)
https://auasb.gov.au/standards-guidance/auasb-
standards/auditing-standards/
New Zealand ISA (NZ) 600 Special Considerations—Audits of Group

Financial Statements (Including the Work of Component
Auditors)
https://www.xrb.govt.nz/standards/assurance-
standards/auditing-standards/
Brazil Since 2005 CFC has adopted ISA, through a convergence
process, as Brazilian auditing standards. The CFC and
IBRACON, report that there is an ongoing system in place to
incorporate new and revised ISA as they become available.
As of 2022, the 2020 ISA version is being applied.
Canada CAS 600, Special Considerations – Audits of Group
Financial Statements (Including the Work of Component
Auditors)
https://www.cpacanada.ca/business-and-accounting-
resources/audit-and-assurance/canadian-auditing-standards-
cas/publications/cas-600-group-audits-have-changed
23
October 2022 Study on the Audit Directive (Directive 2006/43/EC as amended by Directive 2014/56/EU) and
the Audit Regulation (Regulation (EU) 537/2014)
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Jurisdiction Title of Standard issued

Malaysia ISA 600 (Revised), Special Considerations—Audits of
Group Financial Statements (Including the Work of
Component Auditors).
https://mia.org.my/wp-content/uploads/2022/09/ISA-600-
Revised-Standard-and-Conforming-Amendments.pdf
Singapore SSA 600 (Revised) Special Considerations – Audits of

Group Financial Statements (Including the Work of
Component Auditors)
https://isca.org.sg/docs/default-source/audit-assurance/aa-
standards/ssa-600-(revised)(jul-
23)bbc80c34b3574dd797a64e3dba6a58a5.pdf?sfvrsn=469f
4146_2
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Annex 5
Key aspects of the proposed revisions to SA 600

(Below is a summary. For complete details please refer to provisions in draft SA 600 Revised
also put forth for public consultation)
1. Scope and Objectives
(a) SA 600 (Revised) deals with special considerations that apply to an audit of group
financial statements (GFS)24. More importantly, it deals with special considerations for
the Group Auditor when another auditor/s called Component Auditor/s is/are involved
in the audit of GFS. The requirements and guidance in this SA refer to, or expand on,
the application of other relevant ISAs to a group audit, in particular SA 220 (Revised)25,
SA 230, SA 300, SA 315 (Revised 2019), and SA 330. SA 600 (Revised) is intended
for all group audits, regardless of size or complexity.
(b) Group may be organized in variety of ways. For example, a group may be organized
by legal or other entities (e.g., a parent and one or more subsidiaries, joint ventures, or
investments accounted for by the equity method). Alternatively, the group may be
organized by geography, by other economic units (including branches or divisions), or
by functions or business activities.
(c) A Component Auditor may be required by statute or regulation to express an opinion
on the financial statements of a component e.g. CA 2013 requires audit of separate
financial statements of every company which may need to be consolidated into GFS of
its parent company. When a component auditor is also performing or has completed an
audit of the component financial statements, the group auditor may be able to use audit
work performed on the component financial statements, provided the group auditor is
satisfied that such work is appropriate for purposes of the group audit.The Group
Auditor is required to comply with the requirements of this SA before he decides to use
that audit opinion on separate financial statements for the audit of GFS of the Parent.
(d) This SA recognises the fact that group information system and its financial reporting
process may not be aligned with entity’s organisation structure. e.g., an entity may have
branches but its financial reporting process may not be branch-wise but business
division wise or geography wise. Therefore, the Group Auditor will have to apply
judgment to determine the Components based on facts and circumstances and may
consider a group of branches or even legal entities or shared service centres as
Components for the purpose of this SA.
(e) Objectives of this SA are to (a) determine whether to act as Group Auditor or not,
(b) communicate with Component Auditors on the scope, timing, nature and extent
of their work and (c) to obtain sufficient appropriate audit evidence about the
financial information of the component and consoldiation process to check whether
GFS are prepared in accordance with the applicable financial reporting framework.
These aspects are discussed in greater details in the ensuing paragraphs.
24
Group Financial Statements defined here and Consolidated Financial Statements defined in Ind AS 110,
Consolidated Financial Statements are not the same. The former includes audit of F/S of Branches/Divisions of
the same legal entity whereas the latter includes only consolidation of F/S two or more separate legal entities i.e.,
Parent and Subsidiaries.
25
In 2023, the ICAI had undertaken public consultation on four SAs viz. SA 220, SA 250, SA 315 and SA 540
and SQM 1 and 2 to revise those in line with the currently prevailing ISAs and ISQMs.
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2. Group Auditor is Ultimately Responsible for Audit of GFS and Group Audit Report
(a) The Group Engagement Partner remains ultimately responsible, and therefore
accountable, for compliance with the requirements of this SA. Even when the Group
Engagement Partner is permitted to delegate or assign certain tasks to other members
of the Engagement Team, he continues to be ultimately responsible for managing and

achieving the audit quality.
(b) The Group Engagement Partner is required to sufficiently involved throughout the
group audit and in the work of the Component Auditor.
(c) The Group Auditor shall not refer to the work of Component Auditor in the Audit
Report unless it is required by the law or regulation.
3. Acceptance and Continuance of Group Audit

(a) Before accepting or continuing the group audit engagement, the group engagement
partner shall determine whether appropriate audit evidence26 can reasonably be
expected to be obtained to provide a basis for forming an opinion on the group financial
statements. In applying SA 21027, the group auditor shall obtain the agreement of group
management that it acknowledges and understands its responsibility to provide the
engagement team with access to all information that is relevant audit of GFS and
Unrestricted access to persons within the group from whom the engagement team
determines it necessary to obtain audit evidence.
(b) Terms of group audit engagement may require inclusion of additional matters such as
unrestricted communication with Component Auditors, sharing of important
communication between Component Management/TCWG and Component Auditors
and between the entity/component and its regulators with the Group Auditor.
4. Overall Group Audit Strategy and Group Audit Plan
(a) The group auditor is responsible for overall group audit strategy and group audit plan.
In doing so, the Group Auditor is responsible for the following.
(b) Determining components at which the audit work will be performed
(c) Involvement of Component Auditor in the risk assessment procedures and designing
the appropriate audit steps to respond to RoMM
(d) Component Auditors compliance with Ethical requirements including Independence

related. Group Engagement Partner is responsible to communicate ethical requirements
including independence standards to the Component Auditors and obtain their
confirmation of compliance thereof. These requirements from group audit perspectives
could be different from the ones applicable to audit of components performed for local
jurisdiction’s statutory purposes. E.g. it will be necessary to communicate and obtain
confirmation of with compliance requirements of Indian Standards & Codes to
overseas component auditors involved in audit of GFS of Indian entity.
26
As mentioned in pre-paras, NFRA has observed instances of audit firms, both Group Auditor and Component
Auditor, withdrawing from audit engagements due to potential for inadequacy
27
SA 210, Agreeing the Terms of Audit Engagements
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(e) Engagement Resources- Component Auditors competence, capability & adequacy of

time. Group Engagement Partner is required to evaluate the professional competence
and capability such as skill sets, industry specific knowledge of the Component
Auditors. Also, the availability of sufficient time of the Component Auditors for
performing the component audits needs to be evaluated. Paragraphs A62-A71 provides
guidance for the Group Engagement Partner’s evaluation.
5. Engagement Performance
(a) Group Engagement Partner is responsible for determining the nature, timing and extent
of direction, supervision and review of the Component Auditors work. Paragraphs A72
-A77 provide detailed guidance in this regard. Paragraph A76 provides different ways
in which the group auditor may take responsibility for directing, supervising and
reviewing the work of component auditors. Paragraph A76 draws attention to
requirement of SA 220 (Revised) regarding Group Engagement Partner’s responsibility
to review work papers of certain areas like significant matters and significant
judgments of the Engagement Team.
6. Communications with Component Auditors
(a) Group Auditor is required to communicate to the Component Auditor of the respective
responsibilities and expectations. Paragraphs A78-87 lay down specific further
guidance and emphasise timely and effective two-way communication between the
Group Auditor and Component Auditors.
7. Understanding the Group and Its Environment, the Applicable Financial Reporting Framework
and the Group’s System of Internal Control (Para 30-36)
(a) SA 600 (Revised) places obligations on the Group Auditor to comply with the
requirements of SA 315 (Revised)28 understand the Group’s Operating Environment,
Legal & Operating Structure, Business and Regulatory environment, Applicable
Financial Reporting Framework, Group Internal Control, Consolidation Process etc. at
Group Audit level. Para A88 to 107 provide comprehensive guidance and emphasise
significance of understanding aspects such as group legal structure, business model,
commonality of control, centralised activities like use of shared service centres, IT
infrastructure, Group-wide instructions on financial reporting etc. This is a substantial
improvement over the guidance available in current SA 600.
8. Where the Component Auditor is involved, the SA 600 (Revised) requires timely two-way
communication of between two in relation to the following:
a) Matters relating to risk of material misstatements to the group audit and GFS;
b) Related party relationships and transactions; and
c) Events or transactions that affect going concern of the group.
9. Group-wide Identification and Assessment of the Risks of Material Misstatement (RoMM).
The Group auditor is responsible identifying and assessing the ROMM for the GFS and he shall
evaluate whether the procedures performed by both of them i.e., Group Auditor and Component
Auditor. SA 600 (Revised) highlights the benefits of involvement of the Component Auditor’s
28
SA 315 (Revised), IDENTIFYING AND ASSESSING THE RISKS OF MATERIAL MISSTATEMENT
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in the process of identification and assessment of ROMM at Component level due to their direct
knowledge and experience of the components they will be auditing.
10. Group Materiality and Component Performance Materiality. The Group Auditor shall
determine, and also communicate to component auditor, the performance materiality and the
threshold above which misstatements identified in the component financial information are to
be communicated to the group auditor. Paragraphs A116 – 123 elaborate the concept of
component performance materiality and provide guidance to address the aggregation risk.
11. Responding to ROMM (Para 37 -44). In some cases, there will be a need for further audit
procedures to respond to ROMM either centrally (e.g. Shared Service Centres) or at individual
component level. Responsibility to determine the nature, extent, timing and location where
these procedures will be performed, will be that of the Group Auditor. There may be situations
of a large number of components whose financial information is individually immaterial but
material in the aggregate to the group financial statements. In such cases the Group Auditor his
professional judgment for further audit procedures either centrally or at selected component
level by using analytical review procedures or automated tools and techniques. In case of areas
assessed as higher ROMM or as Significant Risk, the Group Auditor shall evaluate the
appropriateness of the design and performance of those further audit procedures. Paragraphs
A124 -139 provide comprehensive guidance in these audit areas.
12. Consolidation Process. The Group Auditor is responsible for evaluating

(a) completeness of the entities and business units included in the CFS as required under
Applicable Financial Reporting Framework;
(b) completeness and appropriateness of consolidation adjustments and reclassifications for
area such as intra-group balances/transactions, accounting policy differences and accounting
period differences;
(c) possible management bias in management judgments; and
(d) whether the financial information audited and communicated by the Component Auditor is
the one that is included in CFS.
13. Evaluating the Component Auditor’s Communications and the Adequacy of Their Work (Para
45-48)
(a) The Group Auditor shall request and the component auditor shall communicate his
findings on matters relevant to the conclusions on the group audit. Therefore, it is not just
the component auditor’s audit report on the F/S of the component but there are a number
of specific areas, such as given below, upon which the component auditor shall
communicate.
• Whether Component Auditor has performed the procedures requested by the Group
Auditor;
• Whether the Component Auditor has complied with the relevant ethical requirements,
including those related to independence, that apply to the group audit engagement;
• Information about instances of non-compliance with laws or regulations;
• Corrected and uncorrected misstatements of the component financial information
identified by the Component Auditor;
• Indicators of possible management bias;
• Description of any deficiencies in the system of internal control identified in connection
with the audit procedures performed; and
• Fraud or suspected fraud involving component management, employees
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14. The Group Auditor shall evaluate the need for review of additional documentation of the
component auditor based on the following:
(a) extent of Component Auditors involvement in the risk assessment procedures ;
(b) significant judgments made by and findings of the Component Auditors;
(c) competence and capabilities of the component auditor; and
(d) whether both of them subject to common policies and procedures for review of audit
documentation.
15. The Group Auditor shall also determine whether additional audit procedures are required to be
performed by either of them.
16. Evaluating the Sufficiency and Appropriateness of Audit Evidence Obtained (Para 51-52) and
Documentation (Para 59)
(a) One of the critical aspects in the evaluation of sufficiency and appropriateness of audit
evidence is the supervision of audit work of Engagement Team and review of their
work papers. SA 220 (Revised) requires the Engagement Partner to review the audit
documentation.
(b) According to this SA, evaluation of sufficiency and appropriateness of audit evidence
obtained by the Component Auditors can be based on the following;
• Component Auditors’ communication of overall findings and conclusions
• Group Auditor’s direction and supervision of the Component Auditors, and review of
their work including review of their additional documentation
17. The Group Auditor’s documentation shall include the following.

(a) Significant matters relating to restrictions on access to information and people which
were considered before accepting or continuing with the engagement or those arose
subsequently.
(b) The basis for determining components, component performance materiality and clearly
trivial amounts.
(c) Evaluation and determination of competence and capabilities of the competent auditor.
(d) Key elements of the group’s internal control.
(e) The nature, timing and extent of the group auditor’s direction and supervision of
component auditors and the review of their work, including, review of additional
documentation of component auditor.
(f) Communication with component auditor
(g) Evaluation of the findings and conclusion of the component auditor.
18. Group Audit documentation comprises the audit files of the group auditor and that of the
component auditor. Group Auditor may provide specific instructions to component auditor
regarding final assembly of audit files and their retention. However, Component auditor audit
documentation ordinarily need not be replicated in the group auditor’s audit file. The Group
Auditor may decide to summarize, replicate or retain copies of certain component auditor
documentation in the group auditor’s audit file to supplement the description of a particular
matter in communications from the Component Auditor, including the matters required to be
communicated by SA 600 (Revised).
19. Communication with Group Management and Those Charged with Governance of the Group
The Group Auditor shall communicate with the TCWG of the group about the following:
❖ Overview of the work performed at the components and nature/extent of group auditor’s
involvement in the component auditor’s work;
Page 32 of 35
NFRA

❖ Areas of concern on the quality of the work of the component auditors;

❖ Scope limitations on the group audit;
❖ Fraud or suspected fraud; and
❖ Deficiencies in the internal financial control.
Page 33 of 35

Sa 600 Proposed Draft

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NFRA

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

Public Consultation and Request for Comments

Last date for receiving the comments is 30 October 2024.

Email [email protected] captioned “Comments on proposed SA 600

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

Purpose of this Public Consultation

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

5. Various Judicial and Parliamentary Committee pronouncements 5

8. Basis for revision of ISA 600- IAASB- paramountcy to public 11

9. Consultation with SEBI, RBI and CAG and their in-principle 13

10. Discussion on apprehension of concentration of audit 13

Annex 1 NFRA’s experience in enforcement cases-Group Audits 17

Annex 2 Group Legal Entity Structure Overview- Top 100 Listed 20

Annex 4 Adoption of ISA 600 internationally 26

Annex 5 Key aspects of the proposed revisions to SA 600 28

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

3. NFRA’s observations from enforcement cases relevant to the proposal

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

5. Various Judicial and Parliamentary Committee pronouncements on need to converge

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

to face challenges in various forms.Corporate India has been acquiring companies

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

6. Provisions in law relevant to the proposal

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

8.2 The project of ISA 600 (Revised) was undertaken to:

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

11. Public Consultation and Request for Comments

The proposed revised Standard can be accessed at link below:

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

The comments may be sent at:

Email [email protected] captioned “Comments on proposed SA 600

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

Sr. Company name Category Total Total Total Total Total

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

Sr. Company name Category Total Total Total Total Total

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

Sr. Company name Category Total Total Total Total Total

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

Extent of Participation/Responsibility of Component Auditors in a sample of top Listed

Source of Data: Independent Auditors Report and CFS for 31.03.2023

Company name Category based % Net % Net % of assets % of

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

Company name Category based % Net % Net % of assets % of

VARUN BEVERAGES LIMITED Large Cap 84.17 15.83 23.36 26.38

PROPOSED REVISION IN SA 600 FOR PUBLIC COMMENTS

Company name Category based % Net % Net % of assets % of

SIEMENS LTD., Large Cap 95.34 4.66 5.87 8.77