NFRA Set to start First Annual Inspection of Key Audit Firms by April 2024

The National Financial Reporting Authority ( NFRA ) is getting ready for its first yearly inspection of big audit firms, including the famous Big Five, starting in April. This inspection will look closely at how they work, if they follow the rules, and if they’re doing what NFRA suggested in its reports from December 2023. Not just the Big Five, but NFRA will also use data analysis to pick other audit firms to check, based on certain risks they might pose.

During these inspections, it’s really important to check if auditors are communicating well with the audit committees of listed companies. NFRA wants to make sure auditing practices are transparent and effective, following all the rules, to make the audit and accounting system stronger. The main goal is to prevent any wrongdoing by companies and protect the interests of shareholders in a growing economy.

The Big Five audit firms are really important in India, especially because they handle a lot of work for big companies in the Nifty-500. These upcoming inspections are a big deal. After the inspections, audit firms will get to share their thoughts on the results before they’re made public. This inspection makes sure everything is fair and makes the rules clearer, which helps make financial reporting stronger and more reliable.

NFRA

The National Financial Reporting Authority ( NFRA ) was constituted on 1st October, 2018 by the Government of India under Sub Section (1) of section 132 of the Companies Act, 2013.

Functions and Duties

As per Sub Section (2) of Section 132 of the Companies Act, 2013, the duties of the NFRA are to:

1. Recommend accounting and auditing policies and standards to be adopted by companies for approval by the Central Government;
2. Monitor and enforce compliance with accounting standards and auditing standards;
3. Oversee the quality of service of the professions associated with ensuring compliance with such standards and suggest measures for improvement in the quality of service;
4. Perform such other functions and duties as may be necessary or incidental to the aforesaid functions and duties.

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