NFRA flags quality control gaps in six audit firms
Mar 27, 2026
Synopsis
The National Financial Reporting Authority (NFRA) has released inspection reports on six major audit firms, including Deloitte Haskins & Sells and Walker Chandiok. These reports highlight deficiencies in quality control systems and audit engagements, with specific concerns raised about non-audit services, audit independence, and personal independence declarations.
The National Financial Reporting Authority (NFRA) on Friday released six inspection reports on major audit firms, including Deloitte Haskins & Sells, Walker Chandiok and Singhi & Co, highlighting certain gaps in their quality control systems and individual audit engagements.
The three other audit firms covered by the regulator are BDG & Co, CNK & Associates and Umamaheswara Rao & Co.
These annual inspections assess the processes and standards adopted by the firms, including their governance framework, effectiveness of internal controls over audit quality, and systems for identifying and assessing audit risks.
Earlier this month, the NFRA had released four such reports on audit firms affiliated with PwC, BDO, EY and KPMG.
In its latest report, the NFRA has said the non-audit service policy applies only to Deloitte India entities, “lacking safeguards against prohibited non-audit services by non-India network firms to Indian clients’ group entities”.
In recent years, NFRA has expressed its displeasure over non-audit services provided by some of these big audit firms to the same companies for whom they were also the statutory auditors, flagging conflict of interest.
For its part, Deloitte has said it’s “compliant with the requirements” set out in Section 144 of the Companies Act that deals with non-audit services and requested the NFRA to provide mandatory guidance on "management services" contained in this section for consistent application to all audit engagements of entities regulated by the watchdog.
In its report on Walker Chandiok & Co, the regulator highlighted issues around audit independence. “The standpoint of the firm of not accepting Walker Chandiok & Co being part of Grant Thornton International Network, is potentially affecting compliance with the independence requirements as per the provisions of the (Companies) Act and Standard on Quality Control (SQC) 1.”
On BDG & Co, the regulator said aspects of SQC compliance require strengthening, particularly the alignment of documentation relating to independence declarations.
The report about Singhi & Co suggests that the firm is “required to implement measures for continuous monitoring of personal independence declarations made by the members of the firm towards their investments”.
CNK & Associates, the regulator said, needs to have documentation regarding nomination of leaders of key functional areas like independence, audit quality, HR and monitoring.
In its report on Umamaheswara Rao & Co, the regulator said the firm’s annual partner-level independence verification was limited to the review of partner’s income tax return only, which does not comprehensively meet the relevant legal requirements.
[The Economic Times]
