NFRA to widen annual reviews to improve audit quality
Hyderabad, Feb 27, 2026
India’s National Financial Reporting Authority (NFRA) will review financial statements of more companies as part of its annual inspection of audit practices this fiscal, according to two persons aware of the matter.
The authority will cover financials of about 35-40 companies signed off by the country’s top auditors in the fiscal ending 31 March, the people quoted earlier said, speaking on the condition of anonymity. That compares with 25 companies covered in the inspections held in the previous financial year (FY25).
The inspection reports, to be released before March-end, will flag deficiencies and areas of improvement in the audit of financial statements of these companies. The reports, which set the benchmark of what the audit regulator expects from statutory audits, however, will not name these companies, as per the global practice.
These reports are the regulator’s critique of how the audit has been conducted and are not disciplinary orders; they serve more as reference material for the audit industry. The increase in the coverage of audited financial statements in NFRA’s review comes as the regulator has also increased the number of inspections of audit firms this fiscal.
With the increase in audit firm inspections, more financial statements come under NFRA’s annual audit quality review. Mint reported on 26 January that in this financial year (FY26), the watchdog will complete the inspection of the top 10 audit firms, the highest in the regulator’s eight-year history.
The areas covered in the inspections include quality control at the audit firms, revenue, and engagement-specific areas, said the first of the two persons cited earlier.
NFRA’s inspections of the practices of major audit firms in the country covering focused areas, including deficiencies in reporting and audit of related party transactions, impairment of non-financial assets, are very critical areas and these reviews help Auditors to focus on audit with the clear expectations of the regulators and other stakeholders, said Prateek Agarwal, partner - audit & assurance, Nangia & Co LLP.
“We believe that this continuous exercise of NFRA and other initiatives being taken by both NFRA and the Institute of Chartered Accountants of India are helping improve the audit quality, and align the same with the global standards,” said Agarwal.
A spokesperson for Walker Chandiok & Co LLP said, “We are committed to audit quality, and we always welcome any improvements that NFRA suggests in enhancing quality and public trust.”
Vishal Divadkar, managing partner & head – audit & assurance, MSKA & Associates, a member firm of BDO International, said that the wider coverage could gradually lift baseline audit quality, particularly in high-judgement areas like related parties, impairment and revenue, as they will be subjected to much deeper, evidence-based challenge.
“Given the large population of public interest entities and the increased activity in the capital markets, wider inspection coverage would strengthen the confidence of domestic and global investors,” said Divadkar.
“For firms, inspections create a constructive feedback loop. Wider inspection coverage would mean refining existing audit methodologies, enhancing training and investing in robust internal quality management systems, thereby strengthening audit quality,” said Divadkar. “Over time, this kind of consistent inspection focus can materially strengthen financial
NFRA to widen annual reviews to improve audit quality reporting and governance, consistent with NFRA’s objective of protecting public/investorinterest.”
In FY25, the inspections covered FY23 financial statements of 25 companies. These includethe ones audited by MSKA & Associates (5), Price Waterhouse Chartered Accountants LLP andPrice Waterhouse & Co Chartered Accountants LLP (3), SRBC & Co. LLP (3) and others.
Queries sent to NFRA and to audit firms Price Waterhouse Chartered Accountants LLP, PriceWaterhouse & Co Chartered Accountants LLP, SRBC & Co. LLP and Deloitte Haskins & SellsLLP remained unanswered till press time.
Inspection reports are the regulator’s critique of the audit and aren’t disciplinary orders
[Mint]
