The National Financial Reporting Authority (NFRA) has urged the audit fraternity to refrain from taking shelter under the much-venerated description of the auditor “being only a watchdog and not a bloodhound”.
The NFRA Chairman R Sridharan in a speech that was to have been delivered to an ICAI event of Western India Regional Council (WIRC) but now published on the NFRA website, describing this as a “serious misconception” and said that it needs to be “exorcised from our minds”.
“This misconception has very far-reaching consequences. The law on the fraud related responsibilities of the auditor has moved far ahead of what it was in the 1890s. We need to forget the watchdog and not the bloodhound description,” Sridharan said.
“If this is not taken care of, any talk of nuanced professional judgments in arcane business and financial matters would have to be regarded only as smokescreens meant to mislead. The foundation of good audit quality is independence,” he said.
Sridharan also highlighted that India has already built into law the separation of audit and non-audit services that other countries are only now attempting to achieve. The separation of audit and non-audit services being undertaken in developed countries is expected to boost auditor independence around the world.
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