Big Audit Firms Under Scrutiny: NFRA Flags Major Audit Lapses in PwC, KPMG, EY, and BDO

The National Financial Reporting Authority (NFRA) has found some major audit lapses in various audit firms affiliated with global networks, including PwC, KPMG, EY, and BDO International. The authority had released four inspection reports on the audit forms affiliated with these companies. The report flags lapses in audit independence, internal governance, fraud risk and scrutiny of related-party transactions.

As per the inspection report, the majority of audit processes in these firms were not as per the Indian auditing standards and regulatory requirements.

NFRA highlighted several issues regarding the independence of six partners for PwC-affiliated companies. There were also issues in the HR policies for recruitment.

The authority during the file reviews noted some irregularities in audit work on investments held for sale. Further, NFRA also observed that some controls on other expenses and related payments were not backed by enough documentation.

Regarding EY affiliate SRBC & Co., the regulator said that it needs to improve its monitoring to ensure its firm-wide independence policies are effective.

The NFRA said that KPMG’s BSR Affiliates Network mostly follows the rules for independence requirements and has fixed earlier quality issues found in past inspections. However, it also said the company should be more careful when taking non-audit work from clients it recently audited.

In a statement, NFRA said that “these inspections provide firms with actionable regulatory feedback early in the financial reporting cycle, helping them enhance their quality control systems.”

Price Waterhouse & Affiliates’ Network – Inspection Report

BSR Affiliates Network – Inspection Report

M/s SRBC & Co. LLP – Inspection Report

M/s MSKA & Associates LLP– Inspection Report