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The NFRA is launching an outreach drive targeting small and mid-sized audit firms after many failed to file annual returns. Meetings in major cities will stress compliance, transparency, and audit quality.
Over 780 firms defaulted for FY24, raising concerns on oversight, financial reporting, and safeguarding public money.
A large number of statutory auditors of listed companies have defaulted on filing their annual returns.
Audit firms have to report details of their partners, audit engagements, network affiliations, regulatory proceedings, quality control and professional independence-related details. Defaulting on these requirements comes in the way of effective audit oversight.
In the case of large audit firms, the NFRA is already holding inspections, audit quality reviews and financial reporting quality reviews to highlight areas of improvement. The drive to reach out to small and medium firms shows broadening of the watchdog’s efforts to improve the quality of audits and financial statements.
The NFRA has emphasised specific aspects of financial reporting on which the auditors need to take a hard look at. This includes loans to associate firms within a group because these could mask efforts at siphoning of public funds.
Experts said if smaller firms that audit listed firms are not complying with statutory norms like annual returns, it is a serious lapse, and they should review their processes.
The NFRA covers auditors of almost 5,400 listed firms, over 80 banking, close to 20 insurers and large unlisted public limited companies. These are audited by about 3,000 firms.
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