ICAI created the AQMM as a self-evaluation tool for audit firms. Credit: ArtemisDiana/Shutterstock.

The Institute of Chartered Accountants of India (ICAI) has approved the second version of its Audit Quality Maturity Model (AQMM), which would be mandatory for audit firms engaged with specific public interest entities.  

Developed by the ICAI’s Centre for Audit Quality, the AQMM 2.0 will apply to firms auditing listed entities, banks, and insurance companies, reported The Hindu BusinessLine. 

This excludes co-operative and multi-state co-operative banks. 

India is said to stand unique in introducing a self-evaluation model for audit quality maturity, with approximately 96,000 audit firms nationwide, most of which are proprietorships.  

Recent corporate fraud incidents have underscored the need for improved audit quality and the role of statutory auditors in detecting corporate malpractices.  

To address these challenges, the ICAI prioritised audit quality, leading to the creation of the AQMM as a self-evaluation tool for audit firms. 

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The initial version, AQMM v 1.0 introduced in 2021, has been mandatory since 1 April 2023 for the same set of firms. However, firms conducting only branch audits are exempt from this requirement. 

The performance level determined by AQMM v 1.0 is subject to peer review and is recorded on the ICAI website, linked to the validity of the firm’s peer review certificate.  

The applicability criteria for AQMM v 2.0 remain unchanged from its predecessor. 

In August 2024, National Financial Reporting Authority (NFRA) and ICAI were reported to have been at odds over plans to update domestic audit standards to align with global norms, according to The Economic Times. 

ICAI representatives expressed concerns about NFRA’s draft norms for revising Standard on Auditing (SA) 600, which would apply only to listed companies and banks, excluding state-run entities.