Audit under Ind AS / IFRS / International GAAP

Ind AS is India's own set of accounting standards, issued by the Ministry of Corporate Affairs and closely converged with IFRS, but not identical to it. Most Ind AS standards mirror their IFRS counterpart closely (Ind AS 115 mirrors IFRS 15, Ind AS 116 mirrors IFRS 16, and so on), but there are specific carve-outs and India-specific modifications in areas such as certain financial instrument classifications and some transitional provisions. Financial statements prepared under Ind AS are not automatically identical to IFRS financial statements — a reconciliation is sometimes needed for group reporting into a pure-IFRS parent.

Applicability is mandatory, not elective, for companies that meet the prescribed criteria under the Companies (Indian Accounting Standards) Rules, 2015 — broadly, listed companies (or companies in the process of listing) and unlisted companies with net worth of ₹250 crore or more, along with their holding, subsidiary, joint venture, and associate companies. Once a company becomes subject to Ind AS, it must continue to apply Ind AS in subsequent years, even if its net worth later falls below the threshold, under the MCA's continuing-applicability rule. Companies outside this scope may voluntarily adopt Ind AS, but once adopted voluntarily, the same continuing-applicability principle applies.

In most cases, yes — two distinct deliverables. The Indian entity's statutory financial statements, audited and filed with the MCA, must comply with whichever framework applies to it as a matter of Indian company law (Ind AS if it crosses the threshold, or Indian GAAP/AS otherwise). Separately, the parent's group auditor typically requires a reporting package — reconciling the local figures to the group's IFRS or US GAAP basis — for consolidation purposes. PNPC prepares or audits both, coordinated so the local statutory figures and the group reporting package are internally consistent and reconcilable.

A group reporting package is a set of financial information — often in a standard template issued by the group's head office — that translates the local entity's results into the group's consolidation framework and materiality. It typically must be delivered to the group auditor well before the local statutory audit deadline, because the parent's own audited consolidated results depend on every component's package arriving on time. Missing this deadline is a visible, escalated problem — it can delay the entire group's results announcement.

Under the old Indian GAAP (AS 19) and the old IFRS lease standard, most operating leases (office rent, equipment rental, etc.) stayed off the balance sheet — only the rent expense hit the profit and loss statement. Under Ind AS 116 / IFRS 16, almost all leases (with narrow exceptions for short-term and low-value leases) are recognised on the balance sheet as a right-of-use asset and a corresponding lease liability, discounted at the incremental borrowing rate. This increases both assets and liabilities, changes the expense pattern from straight-line rent to depreciation plus interest, and can materially affect EBITDA, debt-equity ratios, and any lending covenants tied to those ratios.

The old 'incurred loss' model provisioned for bad debts only once objective evidence of impairment existed — essentially, after the loss event had already happened. Ind AS 109 / IFRS 9 requires a forward-looking Expected Credit Loss model, which estimates probable future losses on receivables and other financial assets from initial recognition, updated for current and forecast economic conditions. For trade receivables, a simplified approach using a provision matrix (based on historical loss rates, adjusted for forward-looking factors) is commonly applied.

It depends on the investor. Many foreign private equity and venture capital investors are comfortable with audited Indian GAAP financial statements for an Indian target, particularly at early stages, and will conduct their own IFRS-basis adjustments during diligence. However, investors with an existing IFRS-reporting portfolio, or those requiring board-level reporting on an IFRS-comparable basis post-investment, often prefer or require Ind AS/IFRS financial statements — either from day one or as a condition attached to the investment. We recommend clarifying this expectation with the investor's finance team early, rather than assuming either way.

First-time adoption, governed by Ind AS 101 (or IFRS 1 for a pure IFRS transition), is the process of preparing an entity's first set of financial statements under the new framework. It requires restating the opening balance sheet at the transition date under the new standards, applying specific mandatory exceptions (certain retrospective applications are prohibited) and electing among optional exemptions (certain retrospective applications are permitted but not required) — for example around business combinations completed before the transition date, cumulative translation differences, and fair value as deemed cost for property, plant and equipment. Getting this restatement wrong misstates every subsequent comparative period.

Yes. IFRS is the primary financial reporting framework used across the UAE, including for UAE Corporate Tax purposes (financial statements prepared in accordance with IFRS, or IFRS for SMEs where eligible, form the basis for taxable income computation under the UAE Corporate Tax Law), for free zone authority filing requirements, and for banking and group consolidation purposes. PNPC's Dubai office prepares and audits IFRS-compliant financial statements for UAE Mainland and Free Zone entities, including UAE subsidiaries of Indian groups and standalone UAE businesses with international stakeholders.

The underlying materiality-setting methodology under the Standards on Auditing (SA 320) is the same regardless of the accounting framework — a benchmark (often profit before tax, revenue, or total assets, depending on the entity's nature) with an appropriate percentage applied, adjusted for qualitative factors. What differs in an Ind AS/IFRS engagement, particularly for a group-reporting component, is that the group auditor often prescribes a separate 'component materiality' for the local audit, which is typically lower than what the local team would otherwise have set independently, to ensure aggregation risk across all group components does not exceed group materiality.

This is a common request during acquisition due diligence or a fundraising process — a buyer or investor may ask for the target's historical financial statements (typically 2–3 years) to be restated under Ind AS or IFRS for comparability with their own reporting or with industry benchmarks. This is technically a first-time adoption exercise applied retrospectively to closed periods, generally undertaken as an advisory/restatement engagement (sometimes separately from, sometimes alongside, an audit or review opinion on the restated figures, depending on what the requesting party needs).

Generally yes, particularly for first-time adoption or a company with material judgement areas — leases, financial instruments, business combinations, or share-based payments. The additional effort goes into technical review of standard-specific working papers, disclosure checklist completion (Ind AS/IFRS disclosure requirements are considerably more extensive than under old Indian GAAP), and, for group-reporting entities, coordination with the group auditor's instructions and timetable. A company with straightforward operations and few judgement-heavy balances will see a smaller incremental effort than one with significant leases, financial instruments, or recent M&A activity.

There is no separate statutory license or certification specifically for 'Ind AS auditors' or 'IFRS auditors' distinct from the general Chartered Accountant qualification required to sign a statutory audit opinion under Section 141 of the Companies Act. What matters in practice is the audit team's actual technical competence in applying the specific standards — Ind AS/IFRS is materially more complex than old Indian GAAP in the judgement areas described above, and ICAI's Standards on Auditing require the auditor to possess sufficient competence for the engagement (SA 220). A qualified CA who has not built genuine Ind AS/IFRS technical depth can technically sign the opinion but is taking on real professional risk in doing so.

A component auditor is the auditor responsible for auditing a specific component (subsidiary, branch, or division) of a group, working under instructions from the group's principal auditor, per Standard on Auditing SA 600 (Using the Work of Another Auditor). PNPC regularly acts as component auditor for the Indian or UAE subsidiaries of multinational groups headquartered elsewhere, working to the group auditor's materiality, reporting format, and timetable, and responding directly to their review queries.

Yes. Companies to which Ind AS applies must file their financial statements with the MCA in XBRL (eXtensible Business Reporting Language) format, tagged to the Ind AS-specific XBRL taxonomy notified by the MCA, as part of the AOC-4 XBRL filing. This is a distinct taxonomy from the one used for companies filing under the earlier Indian GAAP framework, and the tagging exercise itself requires technical familiarity with both the taxonomy and the underlying Ind AS presentation.

Indian GAAP (AS 22) computes deferred tax using an income-statement 'timing difference' approach — essentially comparing accounting income to taxable income for the year. Ind AS 12 uses a balance-sheet 'temporary difference' approach — comparing the carrying value of every asset and liability to its tax base. The balance-sheet approach captures more differences (including some that never flow through the income statement in the old sense) and often produces a materially different deferred tax asset or liability figure on transition, particularly where fair value adjustments, lease right-of-use assets, or business combination fair values are involved.

No. Under the MCA rules, once a company (mandatorily or voluntarily) adopts Ind AS, it must continue to apply Ind AS for all subsequent financial statements — Ind AS applicability, once triggered, is not reversible on a year-to-year elective basis, even if the triggering net-worth threshold is later no longer met. This is an important consideration before voluntarily adopting Ind AS purely for a one-off requirement such as a single funding round.

For companies required to constitute an audit committee under Section 177 of the Companies Act (public companies meeting prescribed thresholds) or under SEBI Listing Obligations and Disclosure Requirements (LODR) for listed companies, the audit committee reviews the financial statements, discusses significant accounting judgements and estimates with the auditor, and recommends the auditor's appointment and remuneration to the Board. In an Ind AS/IFRS engagement, the judgement areas discussed with the audit committee are typically more numerous — lease discount rates, ECL model assumptions, business combination fair values, impairment testing outcomes — reflecting the more principles-based nature of the framework.

PNPC's Chennai, Bangalore, Hyderabad, and Dubai offices work as one engagement team for groups with both Indian and UAE entities. Intercompany balances, transfer pricing positions, and consolidation adjustments are reconciled across both audit files by the same coordinating partner, rather than being handled by two disconnected firms that each see only half the group structure. This matters particularly for related party transactions, cross-charge arrangements, and any UAE Corporate Tax or India transfer pricing documentation that must be internally consistent across both jurisdictions.

The full suite of Standards on Auditing issued by ICAI (aligned to the International Standards on Auditing) applies to any statutory audit in India, regardless of the accounting framework being audited — SA 200 through SA 810. What changes in an Ind AS/IFRS engagement is the application: SA 540 (Auditing Accounting Estimates) becomes significantly more central given the ECL, impairment, and fair-value judgement areas; SA 600 (Using the Work of Another Auditor) applies when acting as component auditor for a foreign group; SA 720 (Other Information) becomes more relevant where the annual report contains extensive non-financial disclosures alongside Ind AS financial statements.

Yes. A qualified opinion typically arises from either a disagreement on accounting treatment (e.g. the entity did not apply Ind AS 116 lease capitalisation correctly, or ECL provisioning was judged inadequate) or a scope limitation (the auditor could not obtain sufficient appropriate audit evidence on a specific matter). PNPC can review the basis of the prior qualification, work with management to correct the underlying accounting if the issue was a genuine misapplication of the standard, and — where the issue is resolved — issue an unqualified opinion in the subsequent period, with appropriate disclosure of the prior period's qualification and its resolution.

Ind AS, as notified under the Companies Act 2013, applies specifically to companies (and, by extension, to certain NBFCs and insurance companies under separate sectoral regulator notifications). LLPs are governed by the Limited Liability Partnership Act, 2008 and are not brought within Ind AS's mandatory scope by the Companies Act rules. An LLP with international stakeholders that nonetheless wants IFRS-comparable financial statements can do so on a voluntary advisory basis, but this would not be a statutory Ind AS audit in the Companies Act sense.

Ind AS 102 / IFRS 2 requires equity-settled share-based payments to be measured at the fair value of the equity instruments granted, at grant date, and expensed over the vesting period. This typically requires an option-pricing model (Black-Scholes or a binomial/lattice model, depending on the option's features) applied by a qualified valuer, using inputs such as expected volatility, expected life, risk-free rate, and dividend yield. We review the valuer's model inputs for reasonableness, test the vesting-period expense allocation, and confirm the disclosure requirements (movement in options outstanding, weighted average exercise price, fair value assumptions) are complete.

Ind AS 115 / IFRS 15 requires identifying distinct performance obligations within a contract (e.g., a software licence, implementation services, and ongoing support may be separate performance obligations) and allocating the transaction price to each based on standalone selling price, recognising revenue as each obligation is satisfied — over time for services delivered continuously, or at a point in time for a delivered licence. For SaaS businesses, this often means annual or multi-year contracts must be examined closely for embedded performance obligations (onboarding, premium support tiers, usage-based components) rather than simply recognising revenue on a straight-line basis over the contract term by default.

Yes. Several Ind AS-driven accounting changes have direct Income-tax Act implications — for instance, the Income Computation and Disclosure Standards (ICDS) framework and specific provisions govern how book profits under Ind AS are adjusted for tax computation purposes, and — for companies that have not opted into a concessional regime such as Section 115BAA (which exempts the company from Minimum Alternate Tax) — Minimum Alternate Tax or normal tax computation requires careful reconciliation between Ind AS book profit and taxable income. MAT provisions, rates, and credit-carry-forward rules are periodically revised by the Finance Act, so the applicable position should always be confirmed for the specific assessment year. PNPC's income-tax team works alongside the audit team on these reconciliations as part of the same engagement.

PNPC agrees a fixed, scoped fee in writing before the engagement begins, based on the entity's size, the complexity of its judgement areas (leases, financial instruments, business combinations, share-based payments), whether it is a first-time adoption or a recurring engagement, and whether group-reporting coordination with a foreign principal auditor is required. We are not the lowest-cost provider for this category of work — the additional technical depth required for a genuinely compliant Ind AS/IFRS opinion costs more than a generalist statutory audit, and we scope and communicate that difference transparently rather than quoting a flat statutory-audit fee and discovering the actual effort later.

Many CA firms in India perform statutory audits competently under old Indian GAAP but have limited hands-on experience with the judgement-heavy areas that define Ind AS/IFRS work — lease capitalisation completeness, ECL modelling, fair-value purchase price allocation, extensive disclosure checklists, and group-auditor coordination under SA 600. PNPC has built this specific technical capability since Ind AS's phased rollout from FY 2016-17, across Indian subsidiaries of multinational groups and UAE entities reporting under IFRS, with a Dubai office that lets us coordinate India-UAE group audits under one engagement team rather than two disconnected firms.

Not on a standalone basis, if it genuinely has no holding, subsidiary, joint venture, or associate company relationship with an entity that itself crosses the Ind AS threshold. However, net worth is measured as of specific reference dates under the MCA rules, and a company approaching the threshold — through organic growth, a recent capital infusion, or a group restructuring — should monitor this annually rather than assume it remains permanently outside scope. Once triggered, the continuing-applicability rule means there is no going back.

PNPC's presence in Chennai, Bangalore, and Hyderabad allows fieldwork to be conducted locally at each operating location without relying entirely on remote evidence gathering, while the technical Ind AS/IFRS review and disclosure checklist sign-off is coordinated centrally by the engagement partner to maintain consistency across locations. For entities with operations in multiple states, this local presence also supports the state-specific GST and other compliance cross-checks that intersect with the financial statement audit.

A statutory audit opinion is the formal, legally required audit under the Companies Act (or the relevant company law of the entity's jurisdiction), expressed in accordance with the applicable Standards on Auditing, and filed with the regulator (MCA in India). A group reporting package review is typically an engagement performed to the group auditor's specific instructions, materiality, and format, for consolidation purposes — it may be a full audit, a review engagement, or agreed-upon procedures, depending on what the group auditor specifies. Many entities need both: the statutory audit for local compliance, and the reporting package (audited or reviewed, per instruction) for group consolidation.

Yes. This is commonly requested during M&A or fundraising due diligence, where a target company's historical Indian GAAP financial statements need to be restated to Ind AS or IFRS presentation for comparability, without necessarily requiring a full audit opinion on the restated figures — sometimes an accountant's compilation, a review engagement, or agreed-upon procedures report is what the counterparty actually needs. PNPC scopes this precisely based on what the requesting party (investor, acquirer, or lender) has specified, rather than defaulting to the highest assurance level by default.