India

The statutory framework for accounting and auditing in India is primarily governed by the Companies Act, 2013, which establishes requirements for the preparation and audit of financial statements. The Act requires that statutory audits of companies be conducted in accordance with auditing standards prescribed by the Central Government under Section 143(10), based on recommendations of the Institute of Chartered Accountants of India (ICAI) and, where applicable, in consultation with the National Financial Reporting Authority (NFRA). Until such standards are formally notified, auditing standards issued by ICAI continue to apply in practice.

In India, the Auditing and Assurance Standards Board (AASB) of ICAI issues Standards on Auditing (SAs), which are applied in statutory audits. These standards are largely based on the International Standards on Auditing (ISA), with modifications where necessary to reflect national legal and regulatory requirements.

The financial reporting framework for companies is also established under the Companies Act, 2013. Accounting standards are developed by ICAI through its Accounting Standards Board and are recommended to the Ministry of Corporate Affairs for notification. India applies Indian Accounting Standards (Ind AS), which are largely converged with International Financial Reporting Standards (IFRS) and are mandatory for specified classes of companies, including listed entities and other public interest entities. Other companies may apply Accounting Standards (AS) depending on their size and regulatory classification.

The Companies Act, 2013 also establishes differential reporting and regulatory requirements based on the nature and size of entities. Listed companies and other specified entities are subject to enhanced financial reporting and audit requirements, including oversight by NFRA, while smaller entities may apply simplified reporting frameworks and are subject to oversight primarily through ICAI’s regulatory mechanisms.

The accountancy profession in India is regulated through a combination of statutory professional bodies and independent public oversight arrangements. The primary professional accountancy organizations are the Institute of Chartered Accountants of India (ICAI) and the Institute of Cost Accountants of India (ICMAI), which regulate Chartered Accountants and Cost and Management Accountants respectively under their enabling legislation. In addition, the Companies Act, 2013 established the National Financial Reporting Authority (NFRA) as an independent regulator responsible for oversight of the audit profession for specified classes of entities.

Regulation of Chartered Accountants

The Institute of Chartered Accountants of India (ICAI) was established under the Chartered Accountants Act, 1949 and is responsible for regulating the profession of Chartered Accountants in India. The Act grants ICAI authority to establish initial and continuing professional development requirements, maintain a register of members, establish ethical, professional, and technical standards, monitor compliance with applicable standards, and investigate and discipline members for professional misconduct.

ICAI is also responsible for developing accounting and auditing standards through its standard-setting boards, including the Accounting Standards Board and the Auditing and Assurance Standards Board. These standards are recommended to the Ministry of Corporate Affairs for notification under the Companies Act, 2013.

Individuals seeking membership must complete prescribed education requirements, practical experience, and professional examinations. Members are awarded the designation of Chartered Accountant and may obtain a certificate of practice to provide audit and other professional services. Statutory audits of financial statements may only be conducted by Chartered Accountants holding such certification.

ICAI operates a Peer Review Mechanism, established in 2002, which evaluates whether audit firms have adequate systems of quality management and comply with applicable professional standards. In addition, the Quality Review Board, established by the Government of India in 2007, conducts quality reviews of audit firms performing statutory audits of public interest entities. The Securities and Exchange Board of India requires audit firms auditing listed companies to undergo peer review under ICAI’s framework.

Regulation of Cost and Management Accountants

The Institute of Cost Accountants of India (ICMAI) was established under the Cost and Works Accountants Act, 1959 and regulates the profession of Cost and Management Accountants in India. The institute is responsible for maintaining a register of members, issuing certificates of practice, establishing professional education and development requirements, setting ethical, professional, and technical standards, monitoring compliance, and investigating and disciplining members for professional misconduct.

Members of ICMAI are authorized to provide cost accounting and cost audit services, including cost audits required under the Companies Act, 2013. However, statutory financial statement audits may only be conducted by Chartered Accountants. ICMAI members may perform such audits only if they are also members of ICAI and hold the relevant certificate of practice.

ICMAI has established a Peer Review Board to conduct reviews of the work of practicing members and promote compliance with professional standards. A Quality Review Board has also been established under the Cost and Works Accountants Act to review the quality of services provided by Cost and Management Accountants.

India has established an independent audit oversight authority, the National Financial Reporting Authority (NFRA), under the Companies Act, 2013. NFRA was constituted by the Government of India in October 2018 and is responsible for overseeing the quality of audit and accounting services for specified classes of companies and auditors. Its functions include monitoring and enforcing compliance with accounting and auditing standards, overseeing audit quality, and investigating and imposing sanctions for professional misconduct by auditors and audit firms.

Statutory auditors in India are required to be members of the Institute of Chartered Accountants of India (ICAI) and hold a certificate of practice issued by ICAI. ICAI, established under the Chartered Accountants Act, 1949 (as amended), continues to regulate its members, including establishing professional standards, monitoring compliance, and operating an investigative and disciplinary system.

Quality assurance review arrangements operate through a combination of mechanisms. ICAI administers a Peer Review Mechanism, established in 2002, which evaluates whether audit firms comply with applicable professional standards. In addition, the Quality Review Board (QRB), established by the Government of India in 2007, conducts quality reviews of audit firms performing statutory audits of public interest entities.

The Securities and Exchange Board of India requires audit firms auditing listed companies to undergo peer review under ICAI’s framework.

The Institute of Chartered Accountants of India (ICAI)

Under the Chartered Accountants Act, 1949 (as amended in 2013), the Institute of Chartered Accountants of India (ICAI) was established with the authority to regulate the profession of Chartered Accountants in India. ICAI’s membership comprises individuals holding the Chartered Accountant designation, which is protected under the Act. The Act grants ICAI authority to establish initial professional development and continuing professional development requirements, maintain a register of members, establish ethical, professional, and technical standards, and investigate and discipline members for professional misconduct.

ICAI developed a Peer Review Mechanism in 2002, which covers audit work performed by its members and is designed to assess compliance with applicable professional standards. In accordance with the Companies Act, 2013, only members of ICAI holding a certificate of practice are authorized to conduct statutory financial statement audits.

ICAI is a founding member of IFAC and is also a member of the Confederation of Asian and Pacific Accountants and the South Asian Federation of Accountants.

The Institute of Cost Accountants of India (ICAI-CMA)

The Institute of Cost Accountants of India (ICAI-CMA), formerly the Institute of Cost and Works Accountants of India, was established in 1944 and is governed by the Cost and Works Accountants Act, 1959. It is the statutory professional body responsible for regulating the profession of Cost and Management Accountants in India.

ICAI-CMA is responsible for maintaining a register of members, issuing certificates of practice, establishing initial and continuing professional development requirements, setting ethical, professional, and technical standards, monitoring compliance, and investigating and disciplining members for professional misconduct. Membership is required for individuals who wish to practice cost and management accountancy in India.

Members of ICAI-CMA are authorized to provide cost accounting and cost audit services, including those required under the Companies Act, 2013. However, statutory financial statement audits may only be conducted by Chartered Accountants. ICAI-CMA members may perform such audits only if they are also members of ICAI and hold a certificate of practice issued by ICAI.

ICAI-CMA is a member of IFAC, the Confederation of Asian and Pacific Accountants, and the South Asian Federation of Accountants.

Quality assurance review arrangements in India operate through a shared framework involving the National Financial Reporting Authority (NFRA), the Quality Review Board (QRB), and the Institute of Chartered Accountants of India (ICAI).

NFRA, established under the Companies Act, 2013 and operational since 2018, conducts inspections and oversees the quality of audit services provided by auditors of specified classes of companies and bodies corporate. In addition, the QRB, established by the Government of India, conducts quality reviews of audit firms performing statutory audits of public interest entities.

ICAI administers a Peer Review Mechanism, established in 2002, which covers audit firms performing statutory audits and evaluates compliance with applicable professional standards and quality management requirements. Audit firms are required to comply with the Standards on Quality Management (SQM 1 and SQM 2) issued by ICAI, which are based on the IAASB’s international quality management standards.

Together, these arrangements provide coverage of audit engagements across the jurisdiction and incorporate key elements of SMO 1, including mandatory quality reviews, independence of oversight for public interest entities, and linkage to investigative and disciplinary mechanisms. Accordingly, a quality assurance review system aligned with SMO 1 requirements is considered to be adopted in India.

Current Status: Adopted

Initial professional development and continuing professional development requirements in India are established by the Institute of Chartered Accountants of India (ICAI) and the Institute of Cost Accountants of India (ICMAI) under their respective enabling legislation.

Under the Chartered Accountants Act, 1949, ICAI is responsible for establishing education and training requirements for Chartered Accountants. ICAI has developed a comprehensive framework for professional education, including prescribed academic programs, practical experience requirements, professional examinations, and continuing professional development. ICAI reports that the International Education Standards (IES) issued by IFAC are reviewed and considered in the development of its education framework, and that elements of the revised IES have been incorporated.

Under the Cost and Works Accountants Act, 1959, ICMAI is responsible for establishing education and training requirements for Cost and Management Accountants. ICMAI has implemented a structured education and professional development framework and reports that revisions to its curriculum have incorporated elements of the revised IES.

While both institutes have incorporated elements of the IES into their respective frameworks, it is not demonstrated that all requirements of the IES in effect as of the time of the assessment have been fully adopted for all professional accountants in the jurisdiction. Accordingly, the IES are considered to be partially adopted in India.

Current Status: Partially Adopted

Under the Companies Act, 2013, auditing standards are prescribed by the Central Government based on recommendations of the Institute of Chartered Accountants of India (ICAI). Until such standards are formally notified, auditing standards issued by ICAI are applied in practice.

The Auditing and Assurance Standards Board of ICAI is responsible for developing the Standards on Auditing (SAs) applied in India. These standards were developed through convergence with the clarified International Standards on Auditing (ISA) issued as part of the IAASB Clarity Project and have been updated over time. However, the standards are not adopted in their entirety as issued by the IAASB and include modifications to reflect national legal and regulatory requirements.

While the Indian Standards on Auditing are substantially converged with ISA, they do not reflect full alignment with the latest ISA Handbook.

The National Financial Reporting Authority (NFRA), established under the Companies Act, 2013 and operational since 2018, is responsible for overseeing compliance with auditing standards and the oversight of auditors of specified classes of companies and bodies corporate.

Accordingly, ISA are considered to be partially adopted in India.

Current Status: Partially Adopted

Each professional accountancy organization in India is responsible for establishing ethical requirements for its members under its respective enabling legislation.

Under the Chartered Accountants Act, 1949, the Institute of Chartered Accountants of India (ICAI) establishes ethical requirements for Chartered Accountants. ICAI has issued a Code of Ethics aligned with the 2024 edition of the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants. The Code incorporates the principles and requirements of the IESBA Code, with modifications to reflect national legal and regulatory requirements.

Under the Cost and Works Accountants Act, 1959, the Institute of Cost Accountants of India (ICMAI) establishes ethical requirements for Cost and Management Accountants. ICMAI has issued a Code of Ethics based on the 2024 edition of the IESBA Code, with modifications incorporated to align with applicable legislation and regulatory requirements in India.

The ethical frameworks established by ICAI and ICMAI are based on the current IESBA Code and apply to their respective members. Modifications introduced at the national level do not reduce the stringency of the requirements. Accordingly, the IESBA Code is considered to be adopted in India.

Current Status: Adopted

Under Article 150 of the Constitution of India, the Comptroller and Auditor General of India (CAG) is responsible for prescribing the form of accounts of the Union and State governments. In this role, the CAG established the Government Accounting Standards Advisory Board (GASAB) in 2002 to formulate accounting and financial reporting standards for government entities.

GASAB issues Indian Government Accounting Standards (IGAS), which are primarily cash-based national standards applied by the central and state governments. These standards incorporate certain elements of international practices but are not based on the International Public Sector Accounting Standards (IPSAS).

India has indicated its intention to transition toward accrual-based public sector accounting. As part of this process, GASAB has developed Indian Government Financial Reporting Standards (IGFRS), which draw on concepts from IPSAS and other international standards to support a gradual transition.

However, IPSAS have not been adopted for application in the jurisdiction. Accordingly, IPSAS are considered not adopted in India.

Current Status: Not Adopted

Investigative and disciplinary arrangements in India operate through a shared framework involving the Institute of Chartered Accountants of India (ICAI), the Institute of Cost Accountants of India (ICMAI), and the National Financial Reporting Authority (NFRA).

Under the Chartered Accountants Act, 1949, ICAI is responsible for establishing and operating an investigative and disciplinary system for Chartered Accountants. The Act establishes formal mechanisms including the Director (Discipline), Board of Discipline, and Disciplinary Committee to investigate complaints and impose sanctions for professional misconduct. Sanctions include reprimands, monetary penalties, suspension, or removal from membership, with a right of appeal to an independent Appellate Authority.

Under the Cost and Works Accountants Act, 1959, ICMAI operates a similar investigative and disciplinary system for Cost and Management Accountants, including mechanisms to investigate complaints and impose sanctions for professional misconduct.

In addition, the National Financial Reporting Authority (NFRA), established under the Companies Act, 2013 and operational since 2018, has authority to investigate and impose sanctions for professional misconduct by auditors and audit firms auditing specified classes of companies and bodies corporate.

Together, these arrangements provide coverage of professional accountants across the jurisdiction and incorporate key elements of SMO 6, including investigative processes, disciplinary mechanisms, the ability to impose sanctions, and the availability of appeal. Accordingly, an investigative and disciplinary system aligned with SMO 6 requirements is considered to be adopted in India.

Current Status: Adopted

Under the Companies Act, 2013, the Ministry of Corporate Affairs (MCA) is responsible for prescribing accounting standards for companies in India. Accounting standards are developed through a standard-setting process led by the Accounting Standards Board of the Institute of Chartered Accountants of India (ICAI) and are notified by the MCA, thereby giving them legal authority.

India has implemented Indian Accounting Standards (Ind AS) through the Companies (Indian Accounting Standards) Rules, 2015, as amended. Ind AS are based on and substantially converged with IFRS Accounting Standards issued by the International Accounting Standards Board, with certain carve-outs and modifications to reflect national legal and regulatory requirements.

Ind AS are required for listed companies and other specified classes of companies, while other entities apply accounting standards notified under the Companies (Accounting Standards) Rules.

The National Financial Reporting Authority (NFRA), established under the Companies Act, 2013 and operational since 2018, oversees compliance with accounting standards for specified classes of companies and auditors.

IFRS Accounting Standards have not been adopted in their entirety as issued by the IASB, and IFRS for SMEs has not been adopted. Accordingly, IFRS are considered to be partially adopted in India.

Current Status: Partially Adopted

Relevant Organizations

• Institute of Chartered Accountants of India (ICAI)
• Institute of Cost Accountants of India (ICAI-CMA)
• Quality Review Board(QRB) of ICAI
• Quality Review Board (QRB) of ICAI-CMA
• Comptroller and Auditor General of India (CAG)
• Government Accounting Standards Advisory Board (GASAB)
• National Financial Reporting Authority.

Relevant Legislation

• Chartered Accountants Act, 1949 (as amended)
• Cost and Works Accountants Act, 1959 (as amended)
• Companies Act, 2013
• Companies (Indian Accounting Standards) Rules, 2015

Relevant Publications

• Government Accounting Standards Advisory Board, “Preface to Indian Government Accounting Standards.”
• IFRS Foundation, “IFRS Application Around the World, Jurisdictional Profile: India,” October 2019.