The National Financial Reporting Authority ( NFRA ), is set to select and conduct a rigorous inspection of audit firms that handle large clients, particularly listed companies, in the next phase of its regulatory review.
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In an interview with The Economic Times, NFRA Chairman Ajay Bhushan Pandey revealed that the authority will soon select accountancy firms auditing listed companies for the upcoming round of inspections. He also emphasized the use of data analytics in identifying firms based on their impact on the audit network.
Also read: NFRA Issues Guidelines on Auditing of Accounting Estimates and Judgments
“We may have to give due weightage to the firms which audit a large number of listed companies because ensuring robust processes in such firms will have a salutary impact on the audits of a whole lot of companies that they audit” Pandey told ET.
Additionally, the chairman stated that inspection reports on the remaining audit firms reviewed last year will be released within a month. Notably, in February 2024, NFRA had announced the inspection of major audit firms, which commenced in April.
Read More: NFRA Set to start First Annual Inspection of Key Audit Firms by April 2024
Established on October 1, 2018, under Section 132(1) of the Companies Act, 2013, NFRA serves as India’s apex body for regulating the auditing profession, ensuring transparency and accountability in financial reporting.
Last year, the NFRA revised the auditing standards SA 600 and SA 299, however the ICAI president, Ranjeet Agawarl has stated that NFRA’s recent findings, where auditors were held accountable for lapses, were based on existing standards, demonstrating that the failures were due to individuals, not the standards themselves.
As per Section 132(2) of the Companies Act, 2013, the NFRA is entrusted with key responsibilities. These include recommending accounting and auditing policies and standards for approval by the Central Government, monitoring and enforcing compliance with these standards, and overseeing the quality of service provided by professionals responsible for ensuring such compliance.
Additionally, NFRA is assigned with suggesting measures to improve service quality and performing any other functions necessary or incidental to its core duties.
Also read: “Learnings from NFRA”: ICAI releases Analysis of Audit Misconduct Orders/Reports
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