Audit firms yet to meet many norms: NFRA
December 6, 2024
Earlier, NFRA had said that during the inspection process, it plans to engage with audit committees and independent directors of companies to get a wider understanding of the issues.
After being pulled up by the National Financial Reporting Authority (NFRA) for serious lapses last year, the Big Five and three other large audit firms have taken several corrective steps. However, in its reports to be released in January following inspections conducted in 2024, the regulator would highlight “areas where these audit firms would still need to improve”, according to an official source.
Last year, the NFRA had brought out auditing problems like the Big Five rendering non-audit services of the listed companies they audit, via affiliates. Another issue highlighted was a lack of proper documentation by the top auditors.
“We will come out with inspection reports on top eight audit firms in January. We have already shared the draft reports with some of these firms, and asked them to respond to our observations,” said the source on condition of anonymity.
The regulator had released its inspection reports for BSR & Co (affiliated to KPMG), Deloitte Haskins & Sells, SRBC & Co (affiliated to EY), and Price Waterhouse Chartered Accountants on December 22 last year. The report on Walker Chandiok & Co was released on December 29.
“We have widened the ambit of inspection this year by adding three new audit firms. We have observed that firms have taken corrective steps on the basis of deficiencies that we had pointed out last time. However, there are still some areas where they need to improve,” the source said. The person said that this year, the firms have been voluntarily avoiding taking up non-audit work through their affiliated firms.
MSKA and Associates (affiliated to BDO) and Lodha & Co are among the three audit firms that are being inspected by NFRA this year in addition to the Big Five.
Earlier, NFRA had said that during the inspection process, it plans to engage with audit committees and independent directors of companies to get a wider understanding of the issues.
[The Financial Express]
