Coming soon: NFRA's reports on top 5 auditors
New Delhi, Dec 10, 2023
The critical assessments based on inspections carried out—a first-of-its-kind exercise by NFRA—cover five firms: Price Waterhouse Chartered Accountants, Deloitte Haskins and Sells, BSR & Co., S.R. Batliboi & Co., and Walker Chandiok & Co.
The National Financial Reporting Authority (NFRA) is finalizing critical assessments of how India’s top auditors function while auditing financial statements of businesses, a person close to the development said, as the regulator works to improve audit quality in the country.
The critical assessments based on inspections carried out—a first-of-its-kind exercise by NFRA—cover five firms: Price Waterhouse Chartered Accountants Llp, Deloitte Haskins and Sells Llp, BSR & Co. Llp, S.R. Batliboi & Co. Llp, and Walker Chandiok & Co. Llp, the person said on the condition of anonymity.
The inspections that started last year continued till March this year, and were followed by discussions with the audit firms. The reports, which will be issued over the next few weeks, will outline what is right and what is not in the way audits are done. The idea is to understand what are the areas where adherence to standards needs to be tighter, give audit firms an opportunity to make improvements, and raise the bar in accounting and auditing in corporate India.
A spokesperson for BSR & Co. said NFRA has not yet released any communication on its findings, and therefore, the firm does not believe it is appropriate to comment. “Audit quality remains our number one priority, and we make significant investments, including in the areas of training, controls and technology, to drive continuous improvements. We are committed to engage with NFRA in our effort to enhance audit quality," the spokesperson said in response to emailed queries from Mint.
A spokesperson for Walker Chandiok & Co. said, “Indeed, we are also aware that the five largest audit firms were selected by NFRA to review their audit quality as is the mandate of NFRA. We welcome the constitution of NFRA and indeed its recent admission to International Forum of Independent Audit Regulators (IFIAR), which will help harmonize reviews between global regulators. Independent audit regulators have been conducting reviews and publishing their reports in many jurisdictions for nearly two decades, and it is great to see Indian users of financial statements will also have access to some publicly available validation of audit quality."
The law mandates NFRA to enforce accounting and auditing standards, the person cited earlier said. “That entails conducting inspections, quality reviews and identifying areas where there are gaps so that the audit firms can make improvements. It largely covers auditing standards but audits are done with reference to accounting and if the business undergoing audit has not followed accounting standards, the auditor is required to point that out."
Queries emailed to NFRA, Price Waterhouse Chartered Accountants, Deloitte Haskins and Sells and S.R. Batliboi & Co. remained unanswered.
“The ongoing quality review is expected to be concluded with the issue of reports and no penalty is contemplated now. “This is not a disciplinary proceeding," the person added.
Amarjeet Chopra, former president, ICAI, said NFRA has three wings, each handling setting-up of standards, quality review and disciplinary proceedings respectively. Quality review is undertaken on some of the audit assignments, and if any glaring deficiency is found, it is referred to its disciplinary committee.
Prior to NFRA’s constitution, the quality review board set up by the government also used to undertake audit quality reviews. If the short comings were glaring, they were referred to ICAI’s disciplinary committee and if they were not too harmful, some advisory or caution letter used to be issued. The same process more or less, is expected to be followed by NFRA.