MSMEs support exemption from statutory audit

New Delhi, Oct 13 (KNN) Earlier this week, the Institute of Chartered Accountants of India (ICAI) in disagreement with the National Financial Regulatory Authority pointed (NFRA) out that the regulatory body has no jurisdiction over MSMEs, in response to the latter asking the prior to simplify Accounting Standards for MSMEs.

Nihar N Jambusaria, President, ICAI stated in several media reports that, “It is not within the purview to propose whether an audit of a particular class of companies is required or not. However, we may look at merits in having audits of these companies.

While speaking with KNN on this matter, Rajesh Dubey, Financial Advisor, FISME said, “It is natural for ICAI body to oppose exempting small entities from statutory audit as large number of small CA firms or individual CA practitioners get a large part of professional fee from such audits and associated assignments.”

“The move of exempting small entities from statutory audit is a welcome move, especially when the businesses are family owned and there are no external stakeholders involved (except may be when borrowings from banks are involved). External auditors may be asked to review accounts of small entities for limited use of banks in such cases, added Dubey.

Expressing his opinion on possibility of exemption for MSMCs from the mandatory statutory audit under the Companies Act, 2013, S P Gupta, President, Meerut Industrial Development Forum (MDFO) stated, “Micro, Small, and Medium Companies (MSMCs) should be exempted from the mandatory statutory audit based on various parameters. Our view is that post GST 100% of sales transactions and around 90% of the input cost transactions there is a self-audit; further staff salaries and labour is self-audited by PF etc. Hence further statutory audit is not required, and it wouldn’t require separate set of accounting standards.”

“All MSMEs listed on stock exchange irrespective of their size should be audited, having banking exposure above INR 10 crore and turnover above INR 50 crore be put under audit. Rest should be exempted,” suggested Gupta.