ICAI Widens Mandatory Applicability of Audit Quality Maturity Model
The Institute of Chartered Accountants of India (ICAI) has widened the group of audit firms that must apply its Audit Quality Maturity Model (AQMM). The change came through an April 2026 announcement of ICAI's Centre for Audit Quality, titled "Widening the Scope of Mandatory Applicability of Audit Quality Maturity Model (AQMM)". It modifies ICAI's earlier announcement dated 11 August 2025 and brings in auditors of group entities of listed companies, banks and insurers, auditors of large unlisted public companies and, from 2027, auditors of entities that raise significant funds from the public or lenders.
AQMM is ICAI's self-assessment framework for audit firms. It works as a matrix against which a practice unit rates the maturity of its firm-wide systems and controls for audit quality and identifies the areas that need strengthening. The current version is AQMM v2.0. Both announcements, along with the earlier AQMM v2.0 announcement, are listed on the ICAI Centre for Audit Quality page.
Who is now covered
The mandatory requirement applies only to practice units that are subject to peer review. The widened scope comes in two phases.
| Effective from | Firms that must apply AQMM |
|---|---|
| 1 April 2026 | Firms auditing the holding company, subsidiaries, associates or joint ventures of a listed entity, of a bank other than a co-operative bank (multi-state co-operative banks are included) or of an insurance company |
| 1 April 2026 | Firms auditing unlisted public companies with paid-up capital of at least Rs 500 crore, or annual turnover of at least Rs 1,000 crore, or aggregate outstanding loans, debentures and deposits of at least Rs 500 crore |
| 1 April 2027 | Firms auditing entities that have raised more than Rs 50 crore from the public, banks or financial institutions during the period under review, and firms auditing other public interest entities |
Firms that conduct only branch audits are not covered. A firm whose only link to a bank or listed group is a branch audit assignment therefore stays outside the mandatory requirement on that ground alone.
What changed from the earlier position
The earlier mandatory scope centred on firms auditing listed entities, banks and insurance companies. Auditors of the subsidiaries, associates, joint ventures and holding companies of those entities were not required to apply AQMM. The April 2026 announcement closes that gap, so a mid-sized firm that audits an unlisted subsidiary of a listed group now falls within the model even if it has no listed client of its own.
The size thresholds for unlisted public companies are alternatives. Crossing any one of the three limits, capital, turnover or borrowings, is enough to bring the auditing firm within the 1 April 2026 phase. The fund-raising test for the 2027 phase is measured over the period under review, so firms should check the financing history of each audit client and not only its balance sheet at year end.
The August 2025 announcement also provided for AQMM levels to be disclosed on the ICAI website and on peer review certificates. A firm's maturity level is therefore not only an internal measure; it becomes visible outside the firm through the ICAI website and the peer review certificate.
What audit firms should do now
- Run a coverage review. List every audit engagement and test it against the categories above: group links to listed entities, banks and insurers, the three size thresholds for unlisted public companies, and the Rs 50 crore fund-raising test. Record the data used and the conclusion in a short memorandum signed off by a partner.
- Check peer review status. The requirement applies to practice units subject to peer review, so confirm the firm's current peer review position alongside the engagement review.
- Treat branch audits separately. Where the only relevant assignment is a branch audit, document that fact, since firms conducting only branch audits are excluded.
- Plan for 2027 now. Firms that are outside the 2026 phase but audit entities with large bank borrowings or public funds should expect to come in from 1 April 2027 and can start the self-assessment early.
- Build the evidence base. AQMM rates firm-wide practice, so a policy manual alone is not enough. Keep an index of the records that show each process operating: review trails, training records, monitoring results and follow-up on exceptions, with an owner and period for each.
- Assign ownership. Designate a partner to lead the exercise, with process owners for each area and one person maintaining the evidence repository, so that offices and branches of the firm reach the same conclusion on coverage.
Updated on 28 September 2026: added the ICAI Centre for Audit Quality announcement, the covered categories and thresholds, the 1 April 2026 and 1 April 2027 phases, the branch-audit exclusion and the link to the August 2025 announcement; removed the statement that the exact classes of firms could not be identified.
