NFRA Chief Flags Governance Lapses, Seeks Stronger Audit Oversight and Self-Regulation
With emerging threats such as cyber risks, artificial intelligence, and sustainability pressures expanding rapidly, Gupta argued that these areas require specialised oversight that audit committees alone may not be equipped to handle.
The National Financial Reporting Authority (NFRA) has raised concerns over persistent weaknesses in corporate governance practices across Indian companies and called for improved audit disclosures, enhanced risk oversight, and long-term financial assessment frameworks.
Speaking at the ASSOCHAM 2nd International Conference on Responsible Corporate Governance and Financial Reporting, NFRA Chairperson Nitin Gupta criticised companies for treating governance requirements as mere formalities.
Gupta noted that many boards still provide minimal reporting on the role and actions of audit committees, limiting stakeholder insight into whether these committees effectively carried out their responsibilities under the Companies Act and SEBI regulations.
According to Gupta, reporting only the number of meetings held is inadequate. He urged the adoption of a standardised reporting format so disclosures become more meaningful, transparent, and comparable across companies. He said this would help restore investor confidence following multiple cases of financial misreporting and governance failures in recent years.
NFRA also called for the creation of dedicated board-level risk management committees. With emerging threats such as cyber risks, artificial intelligence, and sustainability pressures expanding rapidly, Gupta argued that these areas require specialised oversight that audit committees alone may not be equipped to handle.
Another major recommendation includes moving from an annual “going concern” judgment to a longer-term viability assessment over a three to five year horizon. Gupta noted that the conventional 12-month outlook has failed in several global cases where companies collapsed soon after receiving unqualified audit reports. He cited the U.K.’s approach to viability testing as a model India should consider adapting.
NFRA also noted the increasing importance of Environmental, Social and Governance (ESG) reporting, cautioning companies against treating it as a compliance checkbox. With international standards on sustainability assurance evolving rapidly, NFRA said that the credibility of such reporting would soon become a key determinant of corporate trustworthiness.
Gupta further highlighted that the true measure of audit quality lies not in the volume of reporting but in the real-world outcomes, specifically whether companies later face enforcement action, restatement of accounts, or operational collapse.
Calling for a culture shift, he encouraged companies and audit professionals to go beyond compliance and embrace self-regulation. “Adopting global best practices should become part of the corporate mindset, not just a regulatory requirement,” he said.
With NFRA strengthening its oversight tools and expectations, companies may face increasing pressure to demonstrate stronger governance and more transparent financial reporting in the coming years.
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