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Annual transparency report may be must for audit firms

Jan 17, 2023

The National Financial Reporting Authority (NFRA) proposed to make it mandatory for audit firms to file an annual transparency report (ATR).

The report will contain critical information about operational activities, management governance and ownership structures of the audit firms, the audit and accounting watchdog said on Monday. It said the ATR will also contain a description of policies and procedures put in place by the audit firm to deliver high-quality audits.

Stakeholders can submit their feedback on the proposals by February 16.

The move is aimed at improving transparency among audit firms which in turn are expected to boost audit qualities. The proposals are on the lines of some of the international best practices implemented by independent audit regulators.

"NFRA intends prescribing publication of annual transparency report containing certain critical information about the auditor's operational activities, management, governance and ownership structures, and policies and procedures necessary to deliver high-quality audits etc," said an official statement from NFRA.

The proposed disclosures assume significance in the backdrop of concerns about the working of large audit firms and conflict of interest involved. These firms provide both audit and non-audit services to the companies.

In most cases, the audit firms earned higher fees by rendering non-audit services to a client.

[The Economic Times]

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