How Auditors must Communicate with Audit Committee/TCWG: NFRA Issues Circular, Complete Details Inside [Read Order]

The National Financial Reporting Authority ( NFRA ) has issued a detailed circular focusing the communication of auditors with the Those Charged with Governance (TCWG) including Audit Committees.

The authority said that it has noticed there is a need to strengthen the communication between the auditors and TCWG. It has detailed how the whole communication should flow.

The circular issued on 7th January 2026 said that, “The SA 260 (Revised) mandates a two-way communication process that has to be documented alongside any matters communicated orally. There is sufficient guidance within the Standard (refer to para A37-A53 of SA 260 (Revised) and Appendix 2 to the SA) that details the form and process of this communication.”

The authority, in its circular with regards to specific matters to be communicated under SA 265, clarified that the SA deals with Auditor’s communication about the deficiencies in internal controls identified during the audit, with both TCWG and Management. These need to be communicated in writing and in a timely manner.

Two-way communication process

NFRA has detailed how two-way communication can be done effectively. As per SA 260 (Revised), (Paragraph 18), the Auditor shall communicate with TCWG the form, timing, and expected general content of communications.

It is recommended (though not mandatory) that the Auditor and TCWG discuss at the start of the financial year, that is the planned scope and timing of the audit (SA 260 (Revised), Paragraph 15); and the expectations of two-way communication, including typically expected agenda items.

Form of communication by Auditors with TCWG/ACs

The circular has suggested that the communication shall be in writing. In case of oral communication, it shall be documented in writing and shall include the date, time and details of the persons involved in the communication.

The written communication shall form part of the Audit Work Papers and part of the agenda and minutes of the Board or AC meeting held subsequently. Also, the written communication shall be clear and specific.

‘Presentations in bullet form alone, or communication by emails with a caveat of ‘no comments from the other party is construed as acceptance’, is unacceptable, as it does not meet the objective of the SAs’ says the circular.

Timely communication with TCWG/ACs

NFRA is suggesting the two-way communication between Auditors and TCWG/its sub-groups/nodal persons throughout the audit period is key to achieving the objectives of SA 260 (Revised) and SA 265.

The following steps are recommended by the NFRA:

1. Auditors and Those Charged with Governance should meet at least twice annually, once before the audit begins and again well before approval of the financial statements. These meetings should be scheduled to enable meaningful discussion of audit-related issues. The timing may be aligned to support effective deliberations at the Board’s quarterly meetings mandated under Section 173(1) of the Companies Act, 2013.
2. The auditors must engage with management when they experience any difficulty during the audit to obtain the proper audit evidence, where they believe a fraud. In such a situation, the auditor should communicate TCWG in writing.

The circular also details the agenda that should be communicated with the TCWG. It includes:

1. Audit Strategy and Audit Planning including quantification of Materiality and its effect on nature and extent of audit work
2. Auditors assessment of risk of material misstatement (ROMM)
3. Internal Control Environment in particular to prevent frauds and non-compliance with critical laws and regulations
4. Areas of accounting policy judgment and management estimations
5. Areas requiring involvement of experts, either by the Management or the Auditors
6. Accounting or other areas of concerns requiring special attention by the Auditors.
7. Status of audit work and important findings during the audit period:
8. Auditor’s compliance with Independence and Code of Ethics regarding all the relationships and other matters such as business relationships,
9. Non-audit services, if any, between the Firm, Network Firms and the Auditee Company and other specified entities that may have an impact on Independence;
10. Safeguards applied to eliminate or reduce threats to independence.

NFRA has specifically mentioned that Company Secretaries have to provide this circular before the Board of Directors and the Audit Committee to ensure awareness of the same.

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