Assurance Gazette – July 2025 Edition

Welcome to the Assurance Gazette for July 2025 Edition. This edition explores the regulatory requirements introduced through the Industry Standards on Minimum Information to be Provided to the Audit Committee and Shareholders for Approval of Related Party Transactions and the related communication issued by NFRA in its Auditor Interactions Series 3. The NFRA publication focuses on the audit of related parties in the context of Ind AS 24, AS 18, and SA 550. Together, these developments set out clear expectations regarding disclosure, approval processes, and audit procedures for related party transactions. This circular establishes comprehensive standards on the minimum information to be provided for the review and approval of RPTs and outlines audit approaches to strengthen transparency, ensure regulatory compliance, and mitigate fraud risks. In this edition we also highlights the Expert Advisory Committee’s (EAC) opinion on the consolidation of a wholly-owned Section 8 Company by a listed Sponsor Company under Ind AS 110. It clarifies that nonprofit status does not exempt consolidation where control exists, offering crucial guidance on CSR-linked entities and financial reporting obligations.

“Minimum information to be provided to the Audit Committee and Shareholders for approval of RPT” by SEBI and the related NFRA Communication

Introduction

Related party transactions (RPTs) pose significant governance and audit challenges due to their complexity and risk of conflicts of interest. To strengthen transparency, SEBI has issued Circular No. SEBI/HO/CFD/CFD-PoD-2/P/CIR/2025/93 dated June 26, 2025 (the “Circular”), establishing standards for minimum disclosures to audit committees and shareholders. In parallel, NFRA’s Auditor Interactions Series 3 clarifies auditor responsibilities under Ind AS 24, AS 18, and SA 550 (the “NFRA interaction”). Together, these measures provide a comprehensive framework outlining how RPTs should be identified, approved, disclosed, and subjected to rigorous audit scrutiny.

Key Highlights

The main focus is on the key regulatory changes, their practical implications for companies and auditors, and recommended practices for effective compliance with the new disclosure and governance requirements for related party transactions.