NFRA brings out norms for inspecting audit firms

  • NFRA said inspections are intended to identify areas and opportunities for improvement in the audit firm’s system of quality control

Gireesh Chandra Prasad
Updated11 Nov 2022, 11:13 PM IST
NFRA described the audit quality inspection guidelines as a step towards further improving the quality of audit profession.
NFRA described the audit quality inspection guidelines as a step towards further improving the quality of audit profession.

Audit regulator, the National Financial Reporting Authority (NFRA), on Friday brought out a set of guidelines for monitoring the audit firms’ quality and compliance standards.

NFRA said the audit quality inspections will bring systemic improvement in the financial reporting framework in India. Audit inspections are distinct from investigations, but the inspections often forms the basis for initiating a probe.

Quality inspection guidelines is a step towards further improving quality of the audit profession, NFRA said.

The guidelines are along the lines of best practices followed by global regulators. NFRA said audit quality inspections are integral to the functioning of independent audit regulators, world-wide.

The International Forum for Independent Audit regulators (IFIAR), which comprises independent audit regulators from 54 countries, requires that audit regulators, should conduct recurring inspections of audit firms to certify financial statements of public interest entities to assess compliance with applicable professional standard, independence requirements and other rules, laws and regulations.

NFRA said inspections are intended to identify areas and opportunities for improving the system of quality control. Inspections consist of firm-wide review of audit quality and individual file reviews to evaluate the level of compliance with applicable auditing standards and quality control policy and processes.

NFRA clarified that inspections by nature, are distinct from investigations. However, in certain cases, test-check by the inspection teams may provide basis for enforcement or investigation under applicable provisions of law.

“Audit quality inspections will provide an opportunity for feedback and course correction to the audit firms and at the same time foster a greater mutual understanding of the policies and procedures that underlie audit quality management,” NFRA added.

Inspections are intended to bring about systemic improvements in the overall financial reporting framework, it said.

In response to a consultation paper it had brought out in 2021, many suggested that onsite inspection of the firms by NFRA will help inspection teams familiarize themselves with the ways of audit firms and enable audit firms to comply with auditing standards, the regulator said.

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First Published:11 Nov 2022, 11:13 PM IST
HomeEconomyNFRA brings out norms for inspecting audit firms

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