No mandatory audit for small firms
The NFRA(National Financial Reporting Authority) has issued a consultation paper on statutory audit for micro, small and medium companies(MSMCs). Many such firms are essentially family-owned enterprises formed as companies for the sake of limited liability, or to get bank loans, bus route permits, mining licenses and there is no public interest in foisting external audits on them. The paper has defined MSMCs as companies with net worth less than Rs 250 crores. The consultation paper was issued because the NFRA felt it was necessary to revisit the Requirements of mandatory statutory audit for all companies, regardless of size or public interest. Exempting small businesses from mandatory audit would increase the ease of doing business for MSMCs while reducing the compliance burden and costs on such businesses. The audit requirement threshold exemption in Indian tax laws also clearly states the need to eliminate audit of MSMs based on certain thresholds. NERA stated that it conducted a preliminary analysis of the key financial parameters of the companies registered in India based on their filings with the corporate affairs ministry and discovered that the fees paid to auditors by the vast majority of MSMCs are far below what an audit would require if performed in accordance with the letter and spirit of the auditing standards.
This is bound to help MSME increase their ease in doing business and minimize their costs. This is definitely a good thing for the economy as a higher number of small thriving businesses is set to bolster a developing national economy.
