ICAI Delays Implementation of New Quality Management Standards for Accountancy Firms

Original: ICAI defers adoption of new quality management standards by accountancy firms

The Economic Times•Apr 1, 20262 min

In a Nutshell

The Institute of Chartered Accountants of India (ICAI) has postponed the implementation of new quality management standards for accountancy firms from April 1, 2024, until further notice. This decision follows concerns raised by the National Financial Reporting Authority (NFRA) regarding the authority to notify such standards under the Companies Act, 2013.

Key Points

01ICAI has deferred the implementation of new quality management standards (SQMs) for accountancy firms.
02Existing Standards on Quality Control (SQCs) will remain in effect until new regulations are announced.
03The delay reflects tensions between ICAI and the National Financial Reporting Authority (NFRA).
04New guidance notes on financial statements will apply to non-corporate entities starting April 1, 2026.
05Entities with annual turnover exceeding ₹5 crore will need to adopt these guidance notes from April 1, 2025.

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Full Summary

The Institute of Chartered Accountants of India (ICAI) has decided to defer the implementation of its new Standards on Quality Management (SQMs) for accountancy firms, originally set for April 1, 2024. This decision was taken during a council meeting held on March 31 and reflects ongoing tensions with the National Financial Reporting Authority (NFRA), which has raised concerns regarding the authority of ICAI to notify these standards under the Companies Act, 2013. The existing Standards on Quality Control (SQCs) will continue to govern accountancy practices until further notice. The ICAI has indicated a willingness to support the government's notification of SQM 1 and 2 as auditing standards if recommended by the NFRA. SQM 1 focuses on quality management for firms conducting audits or reviews of financial statements, while SQM 2 relates to engagement quality reviews. Additionally, the ICAI has announced that all non-corporate entities and limited liability partnerships must adhere to its guidance notes on financial statements starting from April 1, 2026. However, only those entities with an annual turnover exceeding ₹5 crore will be required to adopt these notes from April 1, 2025, aiming to enhance the standardization and quality of financial reporting.

Key Figures

₹5 crore

Annual turnover threshold for adopting new guidance notes

April 1, 2026

Effective date for guidance notes on financial statements

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Why It Matters

The deferral of the new quality management standards means that accountancy firms will continue to operate under existing regulations, potentially delaying improvements in audit quality and financial reporting standards.

Who is affected

accountancy firms, auditors, and businesses required to comply with financial reporting standards

What to know

Accountancy firms should prepare for the eventual implementation of SQMs and stay updated on any announcements from ICAI regarding new regulations.

FAQ

ICAI deferred the standards due to concerns raised by the NFRA regarding the authority to notify such standards under the Companies Act, 2013.

The new guidance notes will apply to non-corporate entities starting from April 1, 2026, and to entities with an annual turnover exceeding ₹5 crore from April 1, 2025.

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