NFRA highlights lapses in statutory audits conducted by top audit firms – Gudstory

Comments are not disciplinary in nature, but are an opportunity for auditors to improve their systems and procedures. Inspections are part of the regulator’s efforts to monitor the quality of service by audit firms, assess their compliance with auditing and accounting standards, and suggest improvements.

In its report, the regulator highlighted the need to comply with auditor independence requirements in some cases, and red flagged deficiencies in documentation in other cases.

NFRA said SRBC’s policies and procedures to ensure the integrity of audit documents are not in line with certain requirements of the quality control standard. NFRA mandated that the finalized and signed audit document is editable at any time before archival without affecting the sign-off. It also said that the audit firm’s independence policies do not recognize direct and indirect relationships between SRBC and members of the international network of Ernst & Young Global Limited (EY). NFRA alleged that this has resulted in violation of sections 144 and 141 of the Companies Act, 2013. These sections deal with prohibited services and eligibility of auditors.

In a statement, SRBC said it is committed to sustainable, consistent, high-quality audits and considers NFRA’s inputs constructive. “With our strong focus on systems of quality control, governance, talent, tools and methodology, we are committed to maintaining the trust of stakeholders. We look forward to working with all professional bodies to serve the public interest and maintain confidence in the audit profession.”

In the case of BSR & Co LLP, NFRA alleged absence of formal documentation related to investment loss and inadequate audit process in the case of three out of five selected company audits. NFRA reported that during the inspection the firm did not provide details of non-audit services provided by those entities to KPMG network entities and the firm’s audit clients. Therefore, the inspection team could not assess whether BSR was in full compliance with the independence-related requirements of the Code of Conduct and Quality Control Standards, NFRA alleged.

A spokesperson of BSR & Co said that the company will collaborate with NFRA towards the common objective of improving the quality of audit, instilling confidence and trust in the audit profession and fulfilling responsibilities towards investors and other participants in the capital markets .

“NFRA’s inspection process provides us an opportunity to constructively understand their regulatory perspective and identify qualitative improvements in our systems and processes,” the spokesperson said in an email response to Mint. The firm said it has put a lot of effort into building a robust system. Quality control to support compliance and applicable auditing standards. “We appreciate the recommendations and comments in the inspection report and will constructively engage with the Honorable NFRA in evaluating and implementing further reforms in our policies and practices.”

In the case of Deloitte Haskins & Sells LLP, NFRA pointed out certain deficiencies in the documentation and also alleged that in an audit engagement, the audit firm provided non-audit services, amounting to threat of self-review. Deloitte informed the regulator that executing high-quality audits is its “number one priority” and addressed NFRA’s concerns in a letter addressed to it in the regulator’s report.

In the case of Price Waterhouse Chartered Accountants LLP, NFRA found that the firm’s audit documentation is maintained in electronic format and certain documents, such as external confirmations and signed financial statements, are maintained in physical files, which are stored in a single file for better compliance. Should be kept in place. NFRA also noticed some inadequacies in the audit which the watchdog reviewed. However, NFRA took note of the firm’s policy decision to voluntarily restrict the provision of all non-audit services to NFRA governed clients, their subsidiaries and their significant foreign associates.

Queries emailed to Deloitte and Price Waterhouse Chartered Accountants on Friday evening remained unanswered till press time.