NFRA Updates | Audit Firm Inspections & New Guidance on Audit Practices

The National Financial Reporting Authority (NFRA) has released critical updates addressing audit quality, regulatory compliance, and auditor independence. These include key findings from recent inspection reports and insights from its Interaction Series, aimed at strengthening audit governance.

1. NFRA Inspection Reports 2023

NFRA’s latest inspection reports (No. 132.2-2023-06 and No. 132.2-2023-07) focus on two prominent audit firms, i.e. M/s Walker Chandiok & Co. LLP (WCCL) and M/s Deloitte Haskins & Sells LLP. The WCCL Report emphasizes the deficiencies in audit documentation, independence, and compliance with related party transaction assessments. Notably, the inspection found concerns about the independence of the audit firm due to cross-network service provisions and inadequate documentation of significant transactions. The Deloitte Report highlights similar issues concerning non-compliance with auditor independence norms and the failure to properly address related party transactions.

2. NFRA Interaction Series

NFRA’s Interaction Series 2 on Audit Strategy and Audit Plan encourages greater communication between auditors and audit committees, emphasizing the importance of planning and risk assessment. Additionally, the Interaction Series 3 on Related Parties delves into the significance of related party disclosures, identifying potential fraud risks, and ensuring transparency in financial statements. These guidelines are crucial for audit committees and boards in strengthening governance.

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