Institute of Chartered Accountants of India

Member | Established: 1949 | Member since 1977

Under the Chartered Accountants Act of 1949 (revised in 2013), the ICAI was established with the authority to regulate the accountancy profession and powers to establish regulations as necessary to fulfill its duties. ICAI’s membership is comprised of Chartered Accountants, a designation protected under the Act. The Act grants ICAI authority to (i) establish initial professional development and continuing professional development (CPD) requirements; (ii) maintain a register of its members; (iii) ensure members’ adherence to laws and professional standards; and (iv) investigate and discipline members for professional misconduct. In 2002, ICAI developed the Peer Review Mechanism that covers all audit work conducted by its members. The Peer Review Mechanism’s objectives are to ensure that Chartered Accountants who are authorized to conduct audits are complying with applicable standards set by the institute. In accordance with the Companies Act of 1956 (revised in 2013), all auditors must have a practicing certificate issued by ICAI in order to conduct statutory financial statement audits. In addition to being an IFAC founding member, ICAI is a member of Confederation of Asian and Pacific Accountants (CAPA) and the South Asian Federation of Accountants (SAFA).

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Statements of Membership Obligation (SMO)

The Statements of Membership Obligations form the basis of the IFAC Member Compliance Program. They serve as a framework for credible and high-quality professional accountancy organizations focused on serving the public interest by adopting, or otherwise incorporating, and supporting implementation of international standards and maintaining adequate enforcement mechanisms to ensure the professional behavior of their individual members.

Methodology
Last updated: 11/2018
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SMO Action Plan

Status of Fulfillment by SMO

  • SMO 1: Quality Assurance

    ICAI shares responsibility with the Quality Review Board for the quality assurance reviews on audit firms that conduct statutory audits of listed companies in India. Although QA reviews are required only for public interest entities, in 2002, recognizing the need to ensure the quality of services provided by all Chartered Accountants engaged in audit work, the Council of ICAI established a mandatory Peer Review mechanism that is overseen by the institute’s Peer Review Board (PRB). Its objectives are to ensure that all Chartered Accountants are complying with applicable standards set by the institute and to ensure that audit firms have proper systems in place to comply with the applicable standards. In 2018, ICAI, based on a self-assessment, concluded that its system is aligned with the requirements of SMO 1.

    ICAI’s Peer Reviewers are members of ICAI, possess at least ten years of experience as an auditor, and are engaged in audit work. Reviewers are not permitted to review entities in which there is an identified conflict of interest. Reviewers undergo extensive training by ICAI and conduct their reviews either through a Compliance Approach or Substantive Approach, or a combination of both. Firms that have been assessed as satisfactory by a reviewer will be issued a Peer Review Certificate by the Peer Review Board. If a firm has been assessed as unsatisfactory, the PRB will issue recommendations to be rectified. If a firm continuously fails to achieve a satisfactory rating, the PRB may refer the firm to be disciplined by the Disciplinary Directorate under ICAI.

    ICAI has hosted 170 review training sessions and has trained 5787 reviewers and has published Training Modules for Peer Reviewers, including FAQs to guide them during their review work. In 2017, 1082 firms were reviewed.

    As there are multiple bodies responsible for QA in India, ICAI is encouraged to consider collaborating with those bodies to promote and ensure that all relevant QA systems in place are compliant with the requirements of SMO 1.

    Current Status: Sustain

  • SMO 2: International Education Standards

    Under the Chartered Accountants Act of 1949, the ICAI is responsible for establishing initial professional development (IPD) and continuing development (CPD) requirements for Chartered Accountants. ICAI reports that its educational programming is reviewed on a periodic basis and that revised IES requirements have been incorporated.

    ICAI’s states that its Revised Scheme of Education and Training has been designed in accord with the requirements of the revised IES. In line with the requirements under revised IES 1, the methodology of assessment in ICAI’s foundation course has been amended from ‘objective’ to ‘descriptive’ to assess the communication and presentation skills of aspiring entrants at the entry level. The subjects across the three levels–Foundation, Intermediate and Final–have been upgraded in line with revised IES 2. ICAI’s Integrated Course on Information Technology and Soft Skills has also been re-designed to incorporate the revised IES 3. In addition, ICAI reports it has developed two new courses, Business Correspondence and Reporting, and Business and Commercial Knowledge to further advance the competencies of its students.

    In order to ensure that potential students for the Chartered Accountants program are kept aware of the relevant requirements and syllabus, ICAI has collaborated with local universities through joint seminars, career fairs, and career counselling events to raise awareness. ICAI also reports that it has posted the revised standards into its knowledge portal and in addition, has also established a CPD portal that provides a comprehensive calendar of CPD available.

    Lastly, ICAI reports that it participates in the international standard-setting process by reviewing and responding to exposure drafts as issued by the IAESB along with direct participation in the IAESB meetings.

    Current Status: Sustain

  • SMO 3: International Standards on Auditing

    The Companies Act of 1956 (revised in 2013) states that auditing standards issued by ICAI, and subsequently approved by the Ministry of Corporate Affairs , are mandatory for the audit of financial statements of companies in India. The Auditing and Assurance Standards Board (AASB), operating under the Council of ICAI, is responsible for developing Indian Standards on Auditing (SA) for application in India. The AASB has adopted the 2016 ISA, except for ISA 600, which the national authorities in India have considered not applicable in the jurisdiction.

    The AASB was established in 1982 and has established a due process for considering new and revised standards developed by the IAASB to be adopted in India. This process includes (a) the constitution of a study group to prepare the basic draft of the proposed new/revised standard that corresponds to IAASB’s standard, (b) the consideration of the prepared draft by the AASB, (c) the issuance of an exposure draft to the public including members and regulators, (d) the consideration of comments and feedback received from the exposure draft and finalization of the draft, (e) the approval by the ICAI Council, and (f) the publication of final standards on the main website.

    On an on-going basis, ICAI organizes awareness programs, seminars, workshops, and conferences on auditing for members, and it has developed various implementation guides for members who conduct audit work. ICAI has also launched an e-learning module covering the standards for members’ use and continuously reviews its continuing professional development (CPD) offerings to ensure new and updated pronouncements by the IAASB are included. The institute also participates in the international standard-setting process by reviewing and responding to exposure drafts issued by IAASB. With the adoption of the revised standards, ICAI has organized a number of training sessions, CPD, and has developed guidance to help members’ understanding of the new standards. ICAI also ensures that updates from the IAASB are published on the main website and distributed through emails.

    To ensure the quality of audit work and the understanding of auditing standards, ICAI also interacts regularly with regulators and government institutions in the country to discuss audit issues and the AASB represents ICAI by participating in various government committees related to finance and audit. ICAI has also collaborated with universities in India to ensure audit standards are included in the various curricula, and in addition, ICAI has conducted training for officials working in the Comptroller and Auditor General of India offices to facilitate conduct of audit and participation in international audit assignments.

    Current Status: Sustain

  • SMO 4: Code of Ethics for Professional Accountants

    ICAI is responsible for establishing ethical requirements for Chartered Accountants and the institute has developed a Code of Ethics for its members. ICAI’s Code of Ethics, which was developed in 2009, incorporates elements of the 2005 IESBA Code of Ethics, with modifications. The institute reports that while in the process of convergence with the 2016 IESBA Code of Ethics; the 2018 IESBA Code of Ethics was issued, which includes a wide range of structural changes as compared to the 2016 version. As a result of the newly issued Code, the Council of ICAI has begun the convergence process with the 2018 Code.

    ICAI reports that it makes ethical requirements and relevant topics readily available to its members via dedicated and specific emails, seminars and conferences on ethical requirements, and the launch of an Ethical Standards Board website. The website acts as a forum where professional accountants can engage in knowledge-sharing exchanges on ethics and seek assistance on ethical dilemmas.

    Finally, ICAI notes that it participates in the international standard-setting process and reviews and responds to exposure drafts by the IESBA.

    While convergence with the 2018 Code is encouraging and recommended, ICAI is encouraged to consider finalizing steps to adopt the latest changes from the 2016 IESBA Code to be applied by its members in efforts to avoid the reoccurrence of stopping and restarting the convergence process each year. ICAI is encouraged to clarify the timeline for convergence with the 2018 IESBA Code of Ethics.

    Current Status: Execute

  • SMO 5: International Public Sector Accounting Standards

    In India, there are three levels of government: Union Government, State Government, and Local Self-Government. The Government Accounting Standards and Advisory Board (GASAB) develops Indian Government Accounting Standards (IGAS), which is cash-basis, for both Union and State Governments, as well as Union Territories with legislative assemblies. ICAI has no responsibility for the adoption of government-level public sector accounting standards, but dos state that it has been active in promoting the adoption of accrual basis IPSAS to the GASAB. ICAI provides technical inputs to the work of the GASAB and is an active participant on the Board.

    Meanwhile, Local Self-Government follow accounting standards issued by the Committee on Accounting Standards for Local Bodies (CASLB), which operates under ICAI. These standards are called the Accounting Standards for Local Bodies (ASLB) and follow accrual-basis accounting. ICAI reports that elements of IPSAS are integrated into the development of ASLB. The CASLB is comprised of members of the Council of the ICAI, representatives from the Ministry of Urban Development (MOUD), the Comptroller and Auditor General of India , the Controller General of Accounts, the National Institute of Urban Affairs, the Ministry of Panchayati Raj (MOPR), the Directorate of Local Bodies, the Directorate of the Local Fund Audit Department, representatives from Academic institutions, and other professionals as appointed by ICAI. The ASLB are approved by the Technical Committees on budget and Accounting Standards for Urban Local Bodies/Panchayati Raj Institutions (Rural Local Bodies) constituted by the MOUD and MOPR Institutions, all part of the Government of India. Thirteen ASLB have been issued including one cash based ASLB to facilitate transitioning from cash basis to accrual basis of accounting.

    ICAI has played an active role in projects that relate to accounting reform of local governments. For example, the institute has begun developing e-learning modules and various materials on the basics and fundamentals of the accrual accounting for officials of municipal bodies in India. ICAI has also hosted and organized various training programs, seminars and workshops on accrual accounting for government officials, ICAI students, and its members. ICAI makes the standards and pronouncements by the IPSASB available for its members to comment, and ICAI as an institute also reviews and responds to the IPSASB on its exposure drafts.

    ICAI is encouraged to continue its efforts to promote the adoption of IPSAS to the GASAB. And where possible, ICAI is encouraged to also consider the full adoption of IPSAS during the development of local self-government accounting standards.

    Current Status: Review & Improve

  • SMO 6: Investigation and Discipline

    Under the Chartered Accountants Act of 1949 (revised in 2013), the Chartered Accountants of India (ICAI) is responsible for establishing an investigative and disciplinary (I&D) system for its members. ICAI reports that as a result of a self-assessment of its system conducted in September 2017, gaps have been identified and that its system does not fully comply with the requirements of SMO 6. It is unclear if there are plans to address the identified gaps.

    ICAI states that it promotes compliance by its members with applicable ethical, professional, and technical standards as well as relevant laws through its continuing professional development (CPD) program and is also active in raising awareness of the consequences of non-compliance to its members and the general public.

    As a matter of priority, ICAI should develop clear and specific plans to address the gaps identified as part of the self-assessment of its I&D system. ICAI is encouraged to consider CAPA’s Investigation and Discipline Guidance as a resource to address the gaps.

    Current Status: Consider

  • SMO 7: International Financial Reporting Standards

    In accordance with the Companies Act of 1956 (revised in 2013), the Accounting Standards Board (ASB) operating under the ICAI is responsible for developing national accounting standards. The standards are approved and granted legislative backing by the Ministry of Corporate Affairs upon the recommendation of the National Advisory Committee on Accounting Standards (NACAS).

    The ASB was established in 1977 to develop accounting standards and has established an ongoing due process for considering new standards developed by the IASB to be adopted in India. As of July 2018, although Indian Accounting Standards (Ind AS) are based on and substantially converged with IFRS, ASB has not adopted IFRS for domestic companies and has not yet formally committed to adopting IFRS.

    To support the implementation of accounting standards, the institute regularly organizes seminars, and conferences on the standards and has also produced various guidance publications on the application of the standards.

    With the development of Indian Accounting Standards (Ind AS), an implementation group dedicated to Ind AS has been established to develop guidance on the standards through various mediums such as continuing professional development and educational materials. The group has also established the Ind AS Certificate Course to promote the understanding of the standards and in addition, where issues regarding the standards have been raised, an Ind AS Transition Facilitation Group has been established to support its members. Finally, ICAI has also established a Support Desk on the implementation of Ind AS.

    Aside from implementation support, ICAI also indicates that it monitors compliance with Ind AS through its Financial Reporting Review Board (FRRB). The FRRB was established in 2002 by ICAI for reviewing general purpose financial statements of certain companies to improve the financial reporting practices in the jurisdiction.

    Lastly, ICAI also notes it interacts with local regulators and the other professional accountancy organizations in India to discuss developments and issues related to accounting standards. Furthermore, the institute participates in the international standard-setting process by reviewing and responding to exposure drafts issued by the IASB and is also an active participant in the various global and regional standard-setters groups while also co-organizing seminars with the IASB on IFRS and potential applicability of the standards in India.

    ICAI is encouraged to review it SMO Action Plan and update to reflect the current status. ICAI should continue to strive to minimize differences between the Ind AS and the IFRS while advocating to the NACAS for the full adoption of IFRS in efforts to facilitate global harmonization of accounting standards.

    Current Status: Execute

Disclaimer

IFAC bears no responsibility for the information provided in the SMO Action Plans prepared by IFAC member organizations. Please see our full Disclaimer for additional information.

Contact

ICAI Bhawan, Indraprashta Marg, Post Box No. 7100,
New Delhi 110 002
India
Tel: 091-11-3-989-3989
Fax: 091-11-301-10580
icaiho@icai.org
http://www.icai.org

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