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NFRA set to Initiate first Annual Inspection of Key Audit Firms by April, 2024
PrintThe National Financial Reporting Authority (NFRA) is set to commence its inaugural annual review of major auditing organizations, including the Big Five, by April at the latest. This review will focus on evaluating their procedures and adopted standards, according to sources familiar with the regulator’s plans.
The NFRA intends to assess how well these firms adhere to the recommendations issued in its December 2023 reports, where it pointed out various shortcomings in their operational processes, particularly concerning the provision of non-audit services to their audit clients.
In addition to the Big Five, the regulator plans to inspect other auditing firms, selecting them based on a set of “risk-based parameters” currently being developed through data analysis, as per information obtained by ET.
The inspections will also examine the auditors’ ability to maintain effective communication with the audit committees of publicly listed companies, especially the larger ones.
This increased regulatory oversight is designed to ensure that auditors not only comply with the law in letter but also in spirit.
The initiative is aimed at strengthening the audit and accounting framework, which plays a crucial role in preventing corporate misconduct and safeguarding the interests of shareholders in a rapidly expanding economy. The Big Five are significant players in the Indian auditing landscape, having managed audits for three-fifths of Nifty-500 companies as of March 2023. After the completion of its inspections, the NFRA will provide the audited firms sufficient time to respond to its findings before making its reports available to the public.
The NFRA intends to assess how well these firms adhere to the recommendations issued in its December 2023 reports, where it pointed out various shortcomings in their operational processes, particularly concerning the provision of non-audit services to their audit clients.
In addition to the Big Five, the regulator plans to inspect other auditing firms, selecting them based on a set of “risk-based parameters” currently being developed through data analysis, as per information obtained by ET.
The inspections will also examine the auditors’ ability to maintain effective communication with the audit committees of publicly listed companies, especially the larger ones.
This increased regulatory oversight is designed to ensure that auditors not only comply with the law in letter but also in spirit.
The initiative is aimed at strengthening the audit and accounting framework, which plays a crucial role in preventing corporate misconduct and safeguarding the interests of shareholders in a rapidly expanding economy. The Big Five are significant players in the Indian auditing landscape, having managed audits for three-fifths of Nifty-500 companies as of March 2023. After the completion of its inspections, the NFRA will provide the audited firms sufficient time to respond to its findings before making its reports available to the public.
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