The National Financial Reporting Authority's ongoing inspections of major audit firms have prima facie revealed some audit quality issues, for which the regulator is in talks with them, NFRA chairman Ajay Bhushan Prasad Pandey has said. The top five audit firms - BSR & Co, Deloitte Haskins & Sells, SRBC & Co, Price Waterhouse Chartered Accountants, and Walker Chandiok & Co LLP - that were inspected last year have introduced some positive changes, but a lot more needs to be done, Pandey told ET's Banikinkar Pattanayak in an interview. Edited excerpts: What is the status of your annual inspection of audit firms this year? Do you notice any change this time around in the standards and processes followed by the auditors you inspected last year? In this round of inspection, we have divided our work into two parts. First, we have taken some firms that were not inspected by us last year as per our rotation policy.
The Big Five audit firms in India are facing a talent crunch. A regulatory clampdown and a higher number of “relatively safer†career opportunities elsewhere are pulling chartered accountants (CAs) away from the audit profession. A senior partner at a Big Five firm told FE that the auditing verticals in top firms are operating with 20% lower staff than the required strength. At present, the top five firms have around 12,500 people in their audit function. “The amount of work is increasing every year but the staff strength is not growing as fast. Although we need to increase the capacity to handle the additional work and deal with the regulatory oversight, getting the right workforce has certainly become a challenge,†said audit vertical head at a Big Five firm. Another partner in the same firm said that the talent crunch is largely due to heightened regulatory scrutiny and because of the expanding opportunities beyond the traditional audit. “When I completed my CA in 1980s, there were fewer avenues. But young CAs today have a vast number of opportunities, and unless somebody is passionate about auditing, most of them usually land up somewhere else,†he said.
Feb 21, 2022
The government is looking to ban statutory
auditors from taking up non-audit work on “public interest” companies — which
means those that are listed or are above a certain threshold — and their
subsidiaries.
Besides, it is exploring the possibility of joint audit for certain companies
as part of the amendments to the Companies Act, for which a Bill is planned to
be introduced during the Budget session of Parliament that reconvenes next
month, sources told TOI. The ministry of corporate affairs (MCA), which will
pilot the Bill, is currently engaged in consultations and is yet to decide the
final details of the legislation, which will also need inter-ministerial
discussion and a go-ahead from the Union Cabinet.
While both the issues — joint audit and ban on non-audit work by audit firms —
have been discussed in the past, the government has been reluctant to legislate
on the issue principally due to opposition from chartered accountants, a
powerful interest group.
Mar 11, 2020
Statutory auditors have been given more time to
file their form NFRA-2 — which specifies the format of annual return — for
financial year 2018-19 with the National Financial Reporting Authority (NFRA),
the independent audit regulator.
They can now file this form within 150 days from the date of its publication on
NFRA’s website i.e., 150 days from December 9, when it was published on
website.
It may be recalled that the corporate affairs ministry (MCA) had, in December
last year, given a breather for statutory auditors who were earlier required to
file the NFRA-2 form with NFRA by November 30.
It had then said that the form NFRA-2 could be filed with NFRA within 90 days
from the day on which it was published on the website of the authority.
This meant that auditors had time till March 9 to file the comprehensive annual
return for 2018-19. Now, this time limit has been extended by two more months —
by May 9, this form has to be filed.
One of the reasons for extending the timeline in November 2019 was that the
NFRA came up with the format very late and closer to the November 30 deadline.
As the information sought was quite extensive, more time was required and
representations were made to the MCA to extend the last date of filing, sources
said. Even with the revised deadline of March 9, auditors are not able to
provide comprehensive information that is sought to be obtained by the
regulator.
· Feb 10, 2020
The ministry of corporate affairs (MCA) has
floated a consultation paper seeking to review regulations of audit services
and business with a view to enhance independence and accountability of audit
firms. It will explore ways to check concentration of audit services with a few
firms and to analyse its impact on economy.
The Ministry of Corporate Affairs (MCA) is
expected to take a major step to revamp the auditor’s report that accompanies
company balance-sheets, placing more onus on statutory auditors to fulfill
their professional responsibilities. The move is expected in February.
Jan 28, 2020
Besides overhauling the Companies Auditors Report Order (CARO), the government
is also likely to make changes to the secretarial audit reporting that is
mandated under the company law, sources said.
The entire effort will be to provide early-warning signals to policy-makers and
regulators of impending disasters in corporates, they said.
Indications are that the MCA may even ask statutory auditors to digitally file
the new CARO instead of waiting for the auditor report to form part of the
annual report.
The aim is to tighten the working of auditors and also push managements to
conform to more elaborate disclosures on their state of affairs.
Dec 13, 2019
The Corporate Affairs Ministry (MCA) has given a
breather for statutory auditors who were earlier required to file the NFRA-2
form with the National Financial Reporting Authority (NFRA) by November 30. It
has now allowed the form — which specified the format of the Annual return — to
be filed with the new independent audit regulator NFRA within 90 days from the
day on which it was published on the website of the Authority. With December 9
as the date on which form NFRA-2 was published on the Web site, auditors will
have time till March 9 to file the form, said experts in the audit fraternity.
· Oct 19, 2019
Regulator Sebi on Friday put in place stricter
norms for auditors, including prompt disclosures about reasons for their
resignation and requirement to approach chairman of audit committee directly in
case of any concerns with management of the firm concerned
02 Janurary, 2023
The CA
Institute has come up with a revised implementation guide to the auditing
standard (SA230) on ‘audit documentation’.
31st December,2022
Many financial misdoings could have been detected and averted
at an early stage if the auditors concerned had pointed out such instances to
stakeholders in time, a top NFRA official has said. The National Financial
Reporting Authority (NFRA) was set up in October 2018 and has more than 8,000
listed and other companies under its purview.
"Not only in hindsight but otherwise also,
I believe that had many of the violations that we observe in our proceedings
been pointed out by the auditors to
the shareholders and other stakeholders in time, many of the financial misdoings could have been detected and averted at an
early stage," NFRA Chairperson Ajay
Bhushan Prasad Pandey told PTI in an interview.
19th December,2022
Securities and Exchange Board of India (Sebi) chairperson Madhabi Puri Buch nudged auditors to use technology-driven third-party validation in the auditing process in order to check fraud. "Sebi's thrust on third-party validation is driven by the commitment to ensure a true and fair picture of whatever is presented in the markets," Buch said while addressing auditors at an event organised by the Indian Audit and Accounts Department.
Buch said there are more than 20 websites in the
country which auditors can use to validate the claim of the auditee.
While technology is being used as a tool by
fraudsters, we can use the same technology to evade fraud. Auditors can use
tools like GSTN portal, bank websites etc. for doing a third-party
validation," she said
19th December,2022
The Supreme Court extended the medical bail of the former statutory auditor of the Amrapali Group of Companies, once a real estate giant but now embroiled in a string of court battles over undelivered housing projects. A bench of Justices Sanjay Kishan Kaul and Abhay S Oka took on record the report of petitioner Anil Mittal submitted by the medical board constituted by the AIIMS.
"Counsel for the petitioner states that the
counsel who has to address submissions is on his legs in a part-heard matter
and ASG appearing on the opposite side was informed though the adjournment
letter is not before us
18th December,2022
The
National Financial Reporting Authority (NFRA), the country’s sole independent
audit regulator, has started inspections of five audit firms. NFRA Chairman
Ajay Bhushan Pandey said the inspections will take three weeks to complete and
a draft report is expected before financial year end.
In November, NFRA had stated in its guidelines that inspections
are intended to identify areas and opportunities for improvement in the audit
firm’s system of quality control. Inspections will consist of firm-wide review of
audit quality (SQC 1) and individual file reviews on test-check basis to
evaluate the level of compliance with applicable auditing standards and quality
control policy and processes.
Sep 27, 2022
Ease of doing business for MSMEs: A pan India survey of small businesses and startups by community social media platform LocalCircles on Monday said 42 per cent of 5,788 respondents are finding it difficult to meet September 30 deadline to file their tax return and audit report. 16 per cent of respondents said “it will be a significant effort” filing by this month-end while 26 per cent admitted it would be “impossible to file” by September 30 and hence requested an extension by 30-45 days. In contrast, 49 per cent of respondents said they have already filed their tax returns and audit reports.