NFRA also noted weaknesses in policies on non-audit services and root cause analysis. The inspections reviewed remedial actions taken after earlier observations and assessed quality control areas such as consultations, monitoring and human resources.
New Delhi, Mar 16 (PTI) The National Financial Reporting Authority (NFRA) on Monday issued four audit quality inspection reports of at least seven chartered accountant firms, and flagged certain shortcomings.
Other observations pertain to independence in respect of six partners, matters relating to HR policy regarding recruitment, post-sign-off modification and control deficiency over other expenses.
Ind AS 36 pertains to impairment of assets, SA 550 refers to related parties, SA 570 (Revised) pertains to going concern, and Ind AS 24 pertains to related party disclosures.
NFRA said this year’s inspections involved a review of the remedial action taken by the firms in response to the previous inspection observations, as well as areas of quality control — consultation, monitoring and human resources.
There was also a review of the financial statements for the year ended March 31, 2024, for five selected audit engagements, and the focus was on three significant audit areas — revenue and loans and advances, and one was engagement-specific.
“The policies on acceptance of non-audit services for the immediate past audit clients and the root cause analysis policies require strengthening.
“…in one audit engagement of an unlisted company, we observed insufficient evidence supporting the audit opinion. Other matters affecting overall audit quality are identified in the selected audit engagements. However, these are not of such significance as to affect the audit opinion,” the regulator said.
The inspection scope included a review of firm-wide quality controls pertaining to independence, human resources, consultations and monitoring to assess adherence to SQC-1, including follow-up from previous inspections, and a review of selected audit documentation for the annual statutory audit of financial statements for the year ended March 31, 2024.
It focused on the areas of revenue recognition and loans and advances, as well as one engagement-specific area.
“Strengthening of audit evaluation procedures relating to revenue and receivables, as well as assessing their impact on financial reporting, is required. In addition, the firm should strengthen its root cause analysis through more comprehensive coverage,” it said among other observations.
Published on March 16, 2026
