Audit Quality Standards Strengthened As ICAI Extends AQMM To Public Interest Entities

The ICAI has announced a significant expansion of the Audit Quality Maturity Model (AQMM) v2.0, a framework designed to strengthen audit quality and accountability across India’s financial ecosystem. This move reflects ICAI’s commitment to enhancing transparency and ensuring higher standards in auditing practices.

Scope Of Expansion

Under the revised guidelines, AQMM compliance is now mandatory for firms auditing holding, subsidiary, associate, or joint venture entities of listed companies, banks (excluding most co-operative banks), and insurance companies—subject to peer review. Firms engaged solely in branch audits remain exempt.

Applicability Timeline

From April 1, 2026, AQMM will also apply to firms auditing large unlisted public companies that meet specified financial thresholds, as well as entities raising substantial public or institutional funds. In the next phase, effective April 1, 2027, AQMM will extend to firms auditing entities classified as public interest entities, further broadening its reach.

Why AQMM Matters

The AQMM framework evaluates audit firms on parameters such as governance, human resources, technical standards, and quality assurance processes. By mandating compliance, ICAI aims to ensure that firms adopt robust internal systems, thereby improving audit reliability and investor confidence.

Impact On Audit Firms

This expansion means that a larger number of CA firms will need to align their practices with AQMM standards. While this may increase compliance costs and require operational adjustments, it also positions firms to deliver higher-quality audits and strengthen their credibility in the marketplace.

Key Highlights

• ICAI expands AQMM v2.0 applicability to group entity audits
• Mandatory for firms auditing listed companies, banks, and insurance firms
• Effective April 1, 2026, covers large unlisted public companies and fund-raising entities
• From April 1, 2027, extends to public interest entities
• Move aims to enhance audit quality, transparency, and accountability

Sources: Tax Guru, CAclubindia, TaxCorp