Mandate for higher disclosures will improve audit quality: MCA
1 min read 30 Mar 2023, 12:05 AM ISTNew Delhi: The audit and accounting standards regulator National Financial Reporting Authority’s (NFRA) is set to mandate greater disclosure by auditors, to ensure better audit quality, the ministry of corporate affairs (CA) said in a monthly update
PremiumNew Delhi: The audit and accounting standards regulator National Financial Reporting Authority’s (NFRA) is set to mandate greater disclosure by auditors, to ensure better audit quality, the ministry of corporate affairs (CA) said in a monthly update.
In a gradual manner, audit companies will be required to submit annual transparency reports (ATR) for public interest entities, the ministry said. To begin with, statutory auditors of top 1,000 listed companies by market capitalisation must submit annual transparency reports along with FY23 financial statements, it added.
The NFRA had sought public comments on the contents of the transparency report by 24 February. The ministry said recommendations by an expert committee on stepping up operational autonomy of the NFRA, including a dedicated fund, will address concerns over the quality of audit and accounting. It has started work on a draft bill to revamp the audit framework.
In the annual transparency report, NFRA intends to mandate publishing of certain critical information on auditor’s operational activities, governance, management and ownership structures, along with policies and procedures necessary to deliver high-quality audits. The information in the ATR will be useful to the investors, audit committees, independent directors and public at large, the ministry said. The proposed norms are along the lines of contemporary international best practices, it added.
As an independent audit regulator, NFRA is expected to enhance investors’ confidence and bring in transparency and accountability in the auditing profession, and the Centre is making consistent efforts in this direction, it said.
Auditors will also have to disclose the legal structures of the firm, and details of the network it is a member of, in India or abroad, the structure of the network, and whether the network is subject to oversight by any professional accountancy body or independent regulator, along with details of other members of the network. They must also disclose the nature of activities and services rendered by the network, and give information about the internal quality control system.
