The Institute of Chartered Accountants of India (ICAI) issued the Report on Audit Quality Review for Financial Year 2020-21.
The Chairperson of Quality Review Board, Dr. Parvinder Sohi Behuria said, “last year also provided unprecedented challenges, both personal and professional, in every part of the world. There is an unprecedented level of uncertainty about the economy, future earnings, and many other inputs that represent fundamental elements of financial reporting. There have been substantial and multiple financial reporting implications for preparers of financial statements for the purposes of reporting in the short and potentially medium-term. The implications include not only the measurement of assets and liabilities but also disclosure and possibly an entity’s ability to continue as a going concern.”
“Audit regulators across the world also recognized the importance of audit’s contribution in maintaining high-quality financial reporting during this time and stressed the need for audit firms to fully comply with required standards despite, and in light of, the significant impacts of COVID-19 – when investors and other stakeholders may have a greater need for high-quality financial information than ever. Many regulators have issued announcements, statements, and guidelines of import to the audit community during this crisis,” the Chairperson added.
Many public communications have been issued to draw the attention of auditors, companies, and others to the audit, accounting, and disclosure implications of the COVID-19 pandemic and its likely impact on audits of financial statements; as well as the related steps many regulators have taken, such as the extension of filing deadlines, temporary relief from on-site inspections, and the provision of timely updates to firms and stakeholders as to regulator expectations.
It was further added that at the level of the Quality Review Board, we have also put in place various measures such as adapting remote working arrangements, the option of temporary relief from on-site inspections, and adjusting the timing of inspection activity. During the financial year 2020-21, QRB completed 34 reviews of audit quality of 33 entities in India. Out of these 34 completed reviews, QRB issued advisories to concerned Audit firms for further improvement in 25 cases and 2 cases were recommended to the Council of the ICAI for referring them to the Disciplinary Directorate of the ICAI for further necessary action while 7 cases were closed. The present report highlights the key findings observed in the audit quality reviews conducted during the financial year 2020-21 indicating our approach for review, key trends, our expectations, and other focus areas.
“I hope the concerned stakeholders will find this Report useful. Now, it is incumbent on the concerned Audit firms to take remedial actions for the deficiencies highlighted by the QRB, identify the root causes thereof, and improve their audit quality,” the Chairperson added.
The Quality Review Board has expected that audit firms should continue their efforts to improve audit quality on a consistent basis. Audit firms should address the noncompliances identified during the review by performing root-cause analysis. This will help them prevent these issues from reoccurring. We encourage all the Audit firms to take note of the key findings and trends published annually in QRB’s ‘Report on Audit Quality Review’ which are available on the QRB website at http://www.qrbca.in/left-menu/qrb-reports-publications/.
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