# Auditor of an Indian Subsidiary and the Parent's Global Audit Firm

> Source: https://krystal7.com/insights/can-parent-global-audit-firm-audit-indian-subsidiary
> Publisher: Krystal7 Consultants (Krystal7 Innovations Private Limited), Gurugram, India
> Author: CA Nandini
> Published: 24 Jan 2026; updated 24 Oct 2026
> Summary: The group auditor's Indian member firm can audit the subsidiary if it passes section 141 and the section 144 bar on bookkeeping and internal audit.

*Written by CA Nandini Hasija, Krystal7 Consultants. Last updated 23 October 2026.*

## AI Overview Summary

- The parent's global audit firm cannot sign an Indian audit report. Its Indian member firm can, if it is a CA firm practising in India and passes section 141 of the Companies Act, 2013.
- Section 144 bars the auditor from bookkeeping, internal audit, financial systems, actuarial, investment, outsourced financial and management services to the subsidiary or its parent, including services through any entity using the same brand.
- Rotation applies to a private subsidiary with paid up capital of INR 50 crore or more. After rotation, rule 6(3) of the Audit Rules bars a firm from the same network.
- Group audit instructions make the Indian firm a component auditor for the parent's audit. That work never replaces the Indian statutory report under section 143.
- NFRA oversees auditors of listed companies and large unlisted public companies under rule 3 of the NFRA Rules, 2018. Most private subsidiaries of foreign groups fall outside it.

**Yes, through its Indian member firm, but never in its own name. Under section 141 of the Companies Act, 2013, only a Chartered Accountant in practice in India can audit an Indian company. A firm qualifies if most of its partners practising in India are Chartered Accountants. The Indian firm must also pass section 144. That section bars bookkeeping, internal audit and six other services to the subsidiary and its parent, including through the network.**

This page answers one question for foreign groups and their Indian finance teams. It covers eligibility, the section 144 bar, rotation, component audits, NFRA and the US listing rules.

## Can the parent's global audit firm audit the Indian subsidiary?

Yes, through the network's Indian member firm, if that firm is a Chartered Accountant firm practising in India. The overseas firm itself cannot sign. Section 141(1) of the Companies Act, 2013 sets the rule. Section 141(2) lets only a firm's Chartered Accountant partners sign for it.

Most large audit networks practise in India through Indian partnerships or LLPs registered with the Institute of Chartered Accountants of India (ICAI). Their Indian names often differ from the global brand. Each carries its own ICAI firm registration number, which the report and later tax forms quote.

Section 2(17) defines a chartered accountant as a member under the Chartered Accountants Act, 1949 who holds a valid certificate of practice. A partner qualified only abroad, such as a US CPA or a UK chartered accountant, cannot sign an Indian audit report.

| Candidate | Can it be the statutory auditor? | Rule |
|---|---|---|
| The parent's group audit firm abroad | No | Section 141(1) |
| The network's Indian member firm, a partnership or LLP of Chartered Accountants | Yes, if it passes sections 141(3) and 144 | Section 141(1) and (2) |
| The network's Indian advisory or consulting company | No, a body corporate other than an LLP | Section 141(3)(a) |
| An independent Indian CA firm outside the network | Yes, on the same tests | Section 141(1) |
| An individual Chartered Accountant in practice in India | Yes, on the same tests | Section 141(1) |
| A partner qualified abroad but not an ICAI member in practice | Cannot sign | Sections 2(17) and 141(2) |
| The parent's internal audit team or group finance staff | No; they are not in practice, and full time employment elsewhere disqualifies | Sections 141(1) and 141(3)(g) |

Our guide to the [statutory audit of a foreign owned Indian subsidiary](/insights/statutory-audit-foreign-owned-indian-subsidiary) covers the audit itself. This page deals only with who can be the auditor.

## What does section 141 require of the Indian firm?

The firm must be eligible on the date of appointment and stay eligible throughout. Section 141(3) lists the disqualifications, and section 141(4) makes a disqualified auditor vacate office, which creates a casual vacancy. For a network firm, the business relationship and service tests matter most.

The disqualifications that come up with network firms are:

1. **A business relationship.** Section 141(3)(e) bars a business relationship with the company or its group. The group here means its subsidiary, its holding or associate company and the holding company's other subsidiaries. Rule 10(4) of the Companies (Audit and Auditors) Rules, 2014 (the Audit Rules) excludes professional services an auditor may lawfully provide.
2. **Securities and debts.** A relative may hold securities of up to INR 1,00,000 in face value (rule 10(1)). Debts above INR 5,00,000 or guarantees above INR 1,00,000 disqualify (rule 10(2) and (3)).
3. **The twenty audit limit.** Section 141(3)(g) bars a person or partner who already holds more than twenty company audits. When a private company appoints its auditor, G.S.R. 464(E) of 5 Jun 2015 narrows that count. It leaves out one person companies, dormant companies, small companies and private companies with paid up capital below INR 100 crore.
4. **Section 144 services.** Section 141(3)(i) bars anyone who renders a section 144 service, directly or indirectly, to the company or its holding or subsidiary company.

Before appointment, the firm gives written consent and a certificate that it meets these tests, under the first proviso to section 139(1). We keep that certificate with the board minutes. Our batch note on the [first auditor and Form ADT-1](/insights/first-auditor-adt-1-foreign-owned-company) covers the appointment itself.

## Which services does section 144 bar the network from providing?

Section 144 lets the auditor provide only such other services as the board or audit committee approves. It then lists eight barred services and leaves room for more by rule. The bar covers services to the company, its holding company and its subsidiary, given directly or indirectly.

The eight services in section 144 are:

1. accounting and bookkeeping;
2. internal audit;
3. design and implementation of any financial information system;
4. actuarial services;
5. investment advisory services;
6. investment banking services;
7. rendering of outsourced financial services;
8. management services.

Clause (i) adds "any other kind of services as may be prescribed". Services outside the list still need board approval, and the auditor's own independence judgement still applies.

| Service to the Indian subsidiary | Section 144 position | Our practice note |
|---|---|---|
| Bookkeeping, monthly close, financial statement preparation | Barred, clause (a) | Keep the books with a firm that is not the auditor |
| Internal audit | Barred, clause (b) | Also barred when the network runs the parent's internal audit, on our reading of the Explanation |
| ERP or financial system design and implementation | Barred, clause (c) | Watch group ERP roll outs run by the network's consulting arm |
| Gratuity and leave actuarial valuation | Barred, clause (d) | Use an independent actuary |
| Payroll processing | Not named; may fall within outsourced financial services, clause (g) | Keep payroll with a provider that is not the auditor |
| Tax audit and income tax return | Not listed | Allowed with board approval; most subsidiaries use the same firm |
| Transfer pricing report (Form 3CEB, now Form 48) | Not listed | Allowed with board approval |
| Accountant's certificates for remittances (Form 146, old 15CB) | Not listed | Allowed with board approval |
| Share valuation for FEMA pricing | Not listed | Check the parent's regime, which may bar valuation for its auditor |

Our [accounting and bookkeeping](/services/accounting-bookkeeping.html) service sits outside the audit for this reason. A firm cannot keep the books and audit them. Our note on a [virtual CFO for a foreign subsidiary](/insights/virtual-cfo-for-foreign-subsidiary-in-india) explains how groups run finance without the auditor. Our guides to the [tax audit](/insights/tax-audit-under-income-tax-act-2025-form-26) and [Form 3CEB](/insights/form-3ceb-filing-requirement-foreign-founders-india) cover the reports an auditor may still sign.

## How far does the "directly or indirectly" rule reach across the network?

Further than most groups expect. The Explanation to section 144 counts services given through the firm's partners, its parent, subsidiary or associate entity, and any entity it controls. It also counts any entity "whose name or trade mark or brand is used by the firm or any of its partners". A global network brand falls squarely inside that wording.

The bar covers services to "the company or its holding company or subsidiary company". So read the two parts together. Suppose a network member abroad runs the foreign parent's internal audit under the shared brand. On the text, the Indian member firm then renders that service indirectly to the holding company. It would be barred from the Indian audit.

That is our reading of the plain words, and it is strict. The section does not separate network members by country. We ask the Indian firm for a written confirmation that its global independence check covers services to the parent and its other subsidiaries. We ask before the board appoints it.

Two practical checks follow:

1. List every service the network gives the foreign parent and its other subsidiaries, and test each against section 144.
2. Recheck the list whenever the group buys new consulting work from the network, because a later service can disqualify the auditor under section 141(4).

## When must the subsidiary rotate its auditor, and does the network count?

Rotation under section 139(2) applies to listed companies and the classes in rule 5 of the Audit Rules. A private subsidiary rotates once its paid up capital reaches INR 50 crore. After two five year terms, the firm steps out for five years, and no firm from the same network can replace it.

G.S.R. 621(E) of 22 Jun 2017 raised the private company limit from INR 20 crore to INR 50 crore. Paid up capital counts face value, not share premium. A foreign parent that funds its subsidiary through equity can cross the limit in one allotment.

Two rules block a network from keeping the audit after rotation:

1. **The common partner rule.** The second proviso to section 139(2) bars, for five years, a firm sharing a partner with the outgoing firm.
2. **The same network rule.** Rule 6(3) of the Audit Rules bars an incoming firm linked to the outgoing firm "under the same network of audit firms". The Explanation defines the same network by brand name, trade name or common control.

Section 139(3) also lets members rotate the audit partner and team at set intervals. They can also resolve that more than one auditor conducts the audit. A group that wants its network firm and a local firm can appoint joint auditors.

| Company | Rotation applies? | Rule |
|---|---|---|
| Listed company | Yes | Section 139(2) |
| Unlisted public company with paid up capital of INR 10 crore or more | Yes | Rule 5(a) |
| Private company with paid up capital of INR 50 crore or more | Yes | Rule 5(b), as amended by G.S.R. 621(E) |
| Company below those limits with public borrowings or deposits of INR 50 crore or more | Yes | Rule 5(c) |
| One person company or small company | No | Rule 5 |
| Private subsidiary below INR 50 crore of paid up capital, with no such borrowings | No | Rule 5 |

## How do group audit instructions and component audits work?

The group auditor sends the Indian firm instructions, usually under ISA 600 (Revised) or a national version of it. The instructions set the scope, a component materiality and a deadline. The Indian firm reports back as a component auditor. That report goes to the group auditor, not to the Indian shareholders.

The Indian statutory audit is a separate engagement on the same books. The auditor follows the Standards on Auditing under section 143(9). Until the Central Government notifies standards under section 143(10), the ICAI's standards "shall be deemed to be the auditing standards". The Indian report goes to the members, with CARO 2020 and rule 11 matters where they apply.

A network firm usually finds the two jobs easier to combine. It shares the group's audit method, and the group auditor can review its work through the network. An independent Indian firm can still act as component auditor. The group auditor then needs more access and review to rely on it.

| Point | Component work for the group auditor | Indian statutory audit |
|---|---|---|
| Legal basis | The parent's audit law and the group auditor's standards | Companies Act, 2013, sections 139 to 148 |
| Reporting date | Parent's year end | 31 March |
| Framework | Group GAAP, such as US GAAP, IFRS or FRS 102 | Indian AS or Ind AS |
| Standard | ISA 600 (Revised), ISA (UK) 600 (Revised) or PCAOB standards | Standards on Auditing under section 143(9) |
| Materiality | Component materiality set by the group auditor | Set by the Indian auditor |
| Addressee | Group auditor | Members of the Indian company |
| Can one firm do both? | Yes | Yes, if it is eligible under sections 141 and 144 |

The FRC's ISA (UK) 600 (Revised September 2022) applies to periods beginning on or after 15 Dec 2023 ([FRC](https://www.frc.org.uk/library/standards-codes-policy/audit-assurance-and-ethics/auditing-standards/isa-uk-600/)). Our corridor guides on the [statutory audit of a US subsidiary](/insights/statutory-audit-us-subsidiary-india) and of a [UK subsidiary](/insights/statutory-audit-uk-subsidiary-india) set out the timetables.

## What is NFRA's position on group audits and network firms?

The National Financial Reporting Authority (NFRA) oversees the auditors of the companies in rule 3 of the NFRA Rules, 2018. That list covers listed companies, large unlisted public companies, and insurance, banking and electricity companies. A private subsidiary of a foreign group falls outside it unless the Central Government refers it.

NFRA was constituted on 1 Oct 2018 under section 132(1) ([NFRA](https://nfra.gov.in/about-department/introduction/)). Rule 3 brings in an unlisted public company with paid up capital of at least INR 500 crore, turnover of at least INR 1,000 crore, or loans, debentures and deposits of at least INR 500 crore. Each is measured at 31 March of the previous year.

Rule 3 also covers "companies whose securities are listed on any stock exchange in India or outside India". It tests the company's own listing. A private Indian subsidiary of a listed foreign parent is not itself listed.

On group audits, NFRA issued a draft SA 600 (Revised) for public comment on 17 Sep 2024. On 12 Nov 2024 it recommended the revised standard to the Central Government under section 143(10), on the lines of ISA 600 ([PIB](https://www.pib.gov.in/PressReleasePage.aspx?PRID=2072846&reg=48&lang=2)). The release limits it to public interest entities, other than public sector banks and public sector undertakings. It proposed 1 Apr 2026 as the start date. The three ICAI members on the NFRA board disagreed.

That proposed date passed without a notification that we could find. The NFRA website, last updated on 8 Oct 2026, shows none. Check the MCA notifications page and the Gazette of India before you rely on this. Until the Central Government notifies a revised standard, ICAI's SA 600, Using the Work of Another Auditor, continues as the Indian standard. It governs an Indian principal auditor that uses another auditor's work, such as for an Indian company's consolidated accounts. It does not govern a foreign group auditor's instructions to an Indian component.

## What if the parent is listed in the US?

Two US rules then reach the Indian firm. PCAOB registration applies when the Indian firm plays a substantial role in the parent's audit. SEC independence rules treat the Indian subsidiary as an affiliate of the audit client. Neither rule lets a US firm sign the Indian report.

PCAOB Rule 2100 requires registration from every firm that plays a substantial role in an issuer's audit, foreign firms included ([PCAOB](https://pcaobus.org/about/rules-rulemaking/rules/section_2)). Under Rule 1001(p)(ii), a substantial role includes most of the audit work on a component with at least 20 percent of consolidated assets or revenues. It also includes material services of at least 20 percent of engagement hours or fees. The amended rule applies to fiscal years ending on or after 15 Dec 2024.

The SEC staff FAQs on Rule 2-01 of Regulation S-X say affiliates of the audit client include "the audit client's parents and subsidiaries" ([SEC](https://www.sec.gov/about/divisions-offices/office-chief-accountant/office-chief-accountant-application-commissions)). The FAQs also say the accounting firm includes its associated entities. The Indian network firm must meet the SEC's list of prohibited services as well as section 144.

For other listed parents, ask the group auditor which home country ethics rules extend to the Indian subsidiary. The answer sets what else the network may do for the group.

## Should the subsidiary use the network firm or an independent Indian firm?

Either is lawful if it passes sections 141 and 144. The network firm suits a subsidiary that is a significant component of a listed group, because the group auditor relies on it most easily. An independent firm suits a group that buys bookkeeping, internal audit or consulting from the network.

| Factor | Network member firm | Independent Indian firm |
|---|---|---|
| Group auditor's reliance | Easiest; shared method and review | Possible, with more access and review by the group auditor |
| Section 144 reach | Covers services by every entity using the brand, to the parent and to the subsidiary | Covers only that firm and its own connected entities |
| Services the group already buys from the network | Must be tested; some disqualify the firm | Usually no conflict |
| Rotation | Next firm cannot be from the same network (rule 6(3)) | Next firm can be any eligible firm |
| PCAOB registration for a substantial role | Check the PCAOB register before appointment | Check the PCAOB register before appointment |
| Indian law and FEMA knowledge | Varies by team | Varies by firm |

Our guide to [CA firms for foreign subsidiaries in India](/insights/top-ca-firms-for-foreign-subsidiaries-in-india) compares the types of firm. Our note on [controlling an Indian subsidiary](/insights/indian-subsidiary-control-reporting-audit) covers audit within the wider reporting set up.

## What changed in 2026

The eligibility rules in sections 141 and 144 did not change in 2026. The changes sit in group audit standards and in proposals that are still pending.

| Area | Old position | Position on 23 Oct 2026 | Date | Instrument |
|---|---|---|---|---|
| Indian group audit standard | SA 600, Using the Work of Another Auditor | Revised SA 600 recommended for public interest entities with a proposed start of 1 Apr 2026; no notification found | Recommended 12 Nov 2024 | NFRA recommendation under section 143(10) |
| UK group audit standard | ISA (UK) 600 (Revised September 2022) | Updated edition (Revised September 2022, updated September 2025) | Published 25 Sep 2025 | FRC |
| PCAOB substantial role test | Earlier Rule 1001(p)(ii) | Amended rule, 20 percent tests | Fiscal years ending on or after 15 Dec 2024 | PCAOB |
| Small company limits | INR 4 crore capital, INR 40 crore turnover | INR 10 crore and INR 100 crore; subsidiaries still excluded | 1 Dec 2025 | G.S.R. 880(E) |
| Companies Act, 2013 amendments | Current Act | Corporate Laws (Amendment) Bill, 2026 (Bill No. 85 of 2026), pending | Introduced 23 Mar 2026; Joint Committee report 3 Aug 2026 | Lok Sabha, referred to a Joint Committee |

The Bill was not law on 23 Oct 2026. Two of its clauses, as introduced, bear on this page:

1. **Clause 46** would apply the section 144 bar only to classes of companies the Central Government prescribes. It would also keep the bar in place for three years after an auditor completes its term under section 139(2).
2. **Clause 44** would let classes of companies that meet prescribed conditions skip appointing an auditor. The Joint Committee recommended limiting that exemption to private companies.

Until Parliament passes the Bill and the rules follow, sections 139 to 144 apply as they stand.

## Worked example

US Holdings Inc is listed in the US and closes on 31 December. It owns IndiaCo Private Limited, incorporated in 2018 with paid up capital of INR 60 crore from the start. The facts are hypothetical. The group's auditor is a global network. IndiaCo's first AGM, in September 2019, appointed the network's Indian member firm in place of a different first auditor.

### The substantial role test

For calendar 2025, consolidated revenue is USD 500 million and IndiaCo's revenue is USD 110 million. IndiaCo's share is USD 110 million ÷ USD 500 million = 22 percent. That is above 20 percent. If the Indian firm performs most of the audit work on IndiaCo, it plays a substantial role under Rule 1001(p)(ii). It must be registered with the PCAOB.

### The rotation test

IndiaCo's paid up capital of INR 60 crore exceeds the INR 50 crore limit in rule 5(b), so rotation applies. The firm's first term covered FY 2019-20 to FY 2023-24. The AGM in 2024 reappointed it for FY 2024-25 to FY 2028-29, its second and last term.

From FY 2029-30, IndiaCo needs a new auditor. Rule 6(3) bars any firm from the same network, and the outgoing firm cannot return until five years pass. The board should start the selection in 2028.

### The services test for a privately held parent

SEC rules already restrict internal audit outsourcing by a US listed group's auditor. A privately held group has no such rule. Suppose a privately held parent in Europe asks the network's local member firm to run its group internal audit.

The local member uses the same brand as the Indian firm. On the text of section 144 and its Explanation, the Indian firm would then render internal audit indirectly to its client's holding company. We would ask the network to confirm in writing how it treats that work before the group signs the engagement.

## Common mistakes

1. **Naming the overseas group firm in the Indian board resolution.** Fix: appoint the Indian member firm by its Indian name and ICAI registration number.
2. **Using the auditor's network for bookkeeping or payroll.** Fix: keep those services with a firm that is not the auditor.
3. **Testing section 144 only for services to the subsidiary.** Fix: list the network's services to the parent and fellow subsidiaries too.
4. **Missing the rotation trigger after a capital injection.** Fix: retest rule 5 after every allotment.
5. **Planning to hand the audit to another member of the same network after rotation.** Fix: shortlist firms outside the network a year ahead.
6. **Treating the component clearance as the Indian audit.** Fix: plan the Indian statutory audit as a separate deliverable.
7. **Assuming NFRA oversight because the parent is listed abroad.** Fix: test rule 3 of the NFRA Rules on the Indian company's own status.

## Checklist

1. Confirm the proposed firm is an Indian CA firm or LLP with Chartered Accountant partners practising in India.
2. Obtain the firm's written consent and its certificate of eligibility under section 139(1).
3. List every service the network gives the subsidiary, its parent and fellow subsidiaries.
4. Test each service against section 144 and its Explanation.
5. Record board approval for any permitted non audit service under section 144.
6. Check rotation under rule 5 and the same network bar under rule 6(3).
7. Confirm PCAOB registration if the subsidiary is a substantial component of a US listed group.
8. Agree in writing how the component work and the statutory audit share fieldwork and timetables.
9. Retest eligibility each year and after each new service, capital injection or change in the group.

## Key terms

- **Same network (audit firms)**: Under Explanation I to rule 6 of the Companies (Audit and Auditors) Rules, 2014, firms operating under the same brand name, trade name or common control. After mandatory rotation, an incoming auditor from the same network as the outgoing auditor is not eligible. (https://krystal7.com/glossary#same-network-audit-firms)
- **Section 144 prohibited services**: The services a company's statutory auditor may not provide under section 144 of the Companies Act, 2013, directly or indirectly, to the company, its holding company or its subsidiary. They include bookkeeping, internal audit, financial system design, actuarial, investment advisory, investment banking, outsourced financial and management services. (https://krystal7.com/glossary#section-144-prohibited-services)
- **Component auditor**: An auditor who performs audit work on a component, such as an Indian subsidiary, for a group audit. The group auditor directs that work under ISA (UK) 600 (Revised) or ISA 600 (Revised). The Indian statutory audit under section 143 of the Companies Act, 2013 remains a separate engagement. (https://krystal7.com/glossary#component-auditor)
- **National Financial Reporting Authority (NFRA)**: The audit regulator constituted on 1 Oct 2018 under section 132 of the Companies Act, 2013. It recommends auditing standards and oversees the auditors of the companies listed in rule 3 of the NFRA Rules, 2018, such as listed companies and large unlisted public companies. (https://krystal7.com/glossary#national-financial-reporting-authority)
- **Auditor rotation**: The limit in section 139(2) of the Companies Act, 2013 on consecutive terms: one five year term for an individual and two for a firm, then five years off. Rule 5 of the Audit Rules applies it to private companies with paid up capital of INR 50 crore or more, among others. (https://krystal7.com/glossary#auditor-rotation)
- **Certificate of practice**: The certificate a member of the Institute of Chartered Accountants of India needs under section 6 of the Chartered Accountants Act, 1949 to practise. Section 2(17) of the Companies Act, 2013 treats only a chartered accountant holding one as eligible to audit a company. (https://krystal7.com/glossary#certificate-of-practice)

## Frequently Asked Questions

### Can a Big Four firm abroad audit an Indian subsidiary?

Not in its own name. Section 141(1) of the Companies Act, 2013 allows only a Chartered Accountant in practice in India. A firm qualifies if most of its partners practising in India are Chartered Accountants. The network's Indian member firm can act if it passes sections 141 and 144. Only its Chartered Accountant partners sign.

### Can a foreign qualified partner sign the Indian audit report?

No, unless that partner is an ICAI member holding a certificate of practice. Section 2(17) defines a chartered accountant by reference to the Chartered Accountants Act, 1949 and a valid certificate of practice. Section 141(2) lets only Chartered Accountant partners act and sign for a firm.

### Can the auditor's network keep the subsidiary's books?

No. Section 144(a) bars the auditor from accounting and bookkeeping services. The Explanation to section 144 extends the bar to services through any entity whose name, trade mark or brand the firm uses. A network member keeping the books therefore disqualifies the Indian member firm from the audit.

### Does section 144 cover services to the foreign parent?

Yes, on the wording. Section 144 covers services rendered directly or indirectly to the company, its holding company or its subsidiary company. A foreign parent is the holding company, because section 2(46) includes any body corporate. Services the network gives the parent under a shared brand need testing.

### Can the statutory auditor also do the tax audit and Form 3CEB?

Yes. Section 144 does not list the tax audit or the transfer pricing report among barred services. The board approves them as other services under the opening words of section 144. Most foreign owned subsidiaries use one firm for the statutory audit, the tax audit and Form 3CEB. Form 48 replaces Form 3CEB from tax year 2026-27.

### When does a private subsidiary have to rotate its auditor?

Under rule 5 of the Audit Rules, when its paid up capital reaches INR 50 crore. Public borrowings or deposits of INR 50 crore also trigger it. A firm can then serve two terms of five consecutive years. After that, it waits five years before reappointment under section 139(2).

### Can another firm from the same network take over after rotation?

No. Rule 6(3) of the Audit Rules makes an incoming firm ineligible if it is associated with the outgoing firm under the same network. The Explanation defines the network by brand name, trade name or common control. The second proviso to section 139(2) also bars a firm with a common partner.

### What is a component auditor?

An auditor who audits part of a group, such as an Indian subsidiary, on the group auditor's instructions. The group auditor sets scope and component materiality under ISA 600 (Revised) or a national version. In India, the component work sits alongside the statutory audit under section 143 and does not replace it.

### Does NFRA regulate the auditor of a private Indian subsidiary?

Usually not. Rule 3 of the NFRA Rules, 2018 covers listed companies and banking, insurance and electricity companies. It also covers unlisted public companies with INR 500 crore of capital, INR 1,000 crore of turnover or INR 500 crore of borrowings. A private subsidiary falls outside unless the Central Government refers it.

### Has the revised SA 600 on group audits come into force in India?

Not as far as we found on 23 Oct 2026. On 12 Nov 2024, NFRA recommended a revised SA 600, aligned with ISA 600, for public interest entities. It proposed a start of 1 Apr 2026. We found no notification under section 143(10), so ICAI's SA 600 continues. Check the MCA notifications page before relying on this.

### Does the Indian firm need PCAOB registration?

Only if the parent is a US issuer and the firm plays a substantial role in its audit. Under PCAOB Rule 1001(p)(ii), that includes most of the audit work on a component holding at least 20 percent of group assets or revenues. PCAOB Rule 2100 then requires registration.

### Can the subsidiary appoint joint auditors?

Yes. Section 139(3) lets the members resolve that more than one auditor conducts the audit. Some groups pair the network firm with an independent Indian firm. Each joint auditor must pass sections 141 and 144 on its own.

## Sources

- Income Tax Department (Companies Act, 2013 text), Section 2, definitions including clauses 17, 46 and 87, accessed 23 Oct 2026, https://www.incometaxindia.gov.in/w/section-2-148
- Income Tax Department (Companies Act, 2013 text), Section 139, appointment of auditors, accessed 23 Oct 2026, https://www.incometaxindia.gov.in/w/section-139-80
- Income Tax Department (Companies Act, 2013 text), Section 141, eligibility, qualifications and disqualifications of auditors, accessed 23 Oct 2026, https://www.incometaxindia.gov.in/w/section-141-78
- Income Tax Department (Companies Act, 2013 text), Section 143, powers and duties of auditors and auditing standards, accessed 23 Oct 2026, https://www.incometaxindia.gov.in/w/section-143-80
- Income Tax Department (Companies Act, 2013 text), Section 144, auditor not to render certain services, accessed 23 Oct 2026, https://www.incometaxindia.gov.in/w/section-144-80
- High Court of Tripura rules library, Companies (Audit and Auditors) Rules, 2014 as first notified (rules 5, 6 and 10), accessed 23 Oct 2026, https://thc.nic.in/Central%20Governmental%20Rules/Companies%20(Audit%20and%20Auditors)%20Rules,%202014..pdf
- Ministry of Corporate Affairs, Notifications (G.S.R. 464(E) of 5 Jun 2015, private company exemptions; G.S.R. 621(E) of 22 Jun 2017, Companies (Audit and Auditors) Amendment Rules, 2017; G.S.R. 880(E) of 1 Dec 2025), https://www.mca.gov.in/content/mca/global/en/acts-rules/ebooks/notifications.html
- National Financial Reporting Authority, About the Organisation (constitution and rule 3 of the NFRA Rules, 2018), accessed 23 Oct 2026, https://nfra.gov.in/about-department/introduction/
- National Financial Reporting Authority, Request for public comments, Draft SA 600 (Revised), 17 Sep 2024, https://nfra.gov.in/document/request-for-public-comments-draft-sa-600-revised/
- National Financial Reporting Authority, homepage (last updated 8 Oct 2026), accessed 23 Oct 2026, https://nfra.gov.in/
- Press Information Bureau (Ministry of Corporate Affairs), NFRA recommends revision of SQC 1, SQM 1, SQM 2 and SA 600, 12 Nov 2024, https://www.pib.gov.in/PressReleasePage.aspx?PRID=2072846&reg=48&lang=2
- PCAOB, Rule 1001(p)(ii), definition of substantial role, https://pcaobus.org/about/rules-rulemaking/rules/section_1/section-1-general-provisions-rule-1001-p-ii
- PCAOB, Section 2 rules, Rule 2100 registration requirements, https://pcaobus.org/about/rules-rulemaking/rules/section_2
- US Securities and Exchange Commission, Office of the Chief Accountant, Application of the Commission's Rules on Auditor Independence, FAQs, https://www.sec.gov/about/divisions-offices/office-chief-accountant/office-chief-accountant-application-commissions
- Financial Reporting Council, ISA (UK) 600 (Revised September 2022, updated September 2025), https://www.frc.org.uk/library/standards-codes-policy/audit-assurance-and-ethics/auditing-standards/isa-uk-600/
- Lok Sabha, Corporate Laws (Amendment) Bill, 2026 (Bill No. 85 of 2026), as introduced 23 Mar 2026, clauses 44 (section 139) and 46 (section 144); Joint Committee report presented 3 Aug 2026, https://sansad.in/ls/legislation/bills

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