NFRA finds lapses in Audit Quality of Walker Chandiok and Co. LLP [Read Inspection Report]

The National Financial Reporting Authority (NFRA) has found lapses in the Audit Quality of Walker Chandiok and Co. LLP.

Section 132 of the Companies Act 2013 mandates the National Financial Reporting Authority (henceforth, NFRA) to inter alia monitor compliance with Auditing Standards, to oversee the quality of service of the professions associated with ensuring compliance with such standards, and to suggest measures required for improvement in quality of their services. Under this mandate, NFRA initiated an audit quality inspection of the audit firm Walker Chandiok and Co LLP (henceforth, ‘the Firm’ or ‘WCCL’) in December 2022.

The scope of the inspection comprised a review of firm-wide quality controls to assess the Audit Firm’s adherence to SQC-1, as well as a review of selected audit documentation from the annual statutory audit of financial statements for the financial year ending March 31, 2021. Due to the increased risk of material misstatement, three key audit areas were selected for each audit engagement: revenue, trade receivables, and investments. The on-site inspection was carried out during the month of December 2022.

The Inspection Team met with Audit Firm personnel, reviewed rules and processes, and inspected documents. The findings were communicated to the Audit Firm, and after reviewing the responses, a draft inspection report was issued to them. The replies and documents submitted by the Audit Firm have been examined in finalising this report. The key observations in this report are summarised as follows:

a. The firm’s audit paperwork includes both electronic and physical files. The absence of integration between electronic and paper files in audit documentation can lead to non-compliance with SQC 11 and other Standards on Auditing (SAs), as well as questions about its trustworthiness. (Para 12 to 14)

b. Grant Thornton Bharat LLP (GTBL), Grant Thornton Advisory Private Limited (GTAPL) and Grant Thornton International Limited (GTIL) are ‘directly or indirectly’ related entities as per Explanation (ii) to Section 144 of the CA 2013. These entities are also part of a large global ‘GTIL Network’ as per SQC 1. However, the Firm denied the existence of direct or indirect relationship and Networks.

While the WCCL (controlled by Mr. Vinod Chandiok, father) declared in its filings with PCAOB2 that it had no ‘audit related memberships, affiliations or similar arrangements’ with any other entity, GTBL which is controlled by Mr. Vishesh Chandiok (son), declared in its filings with PCAOB that it had ‘audit related memberships, affiliations or similar arrangements’ with WCCL and the global network namely GTIL.

The Firm did not provide, during this inspection, details of GTIL Network entities, and non-audit services provided by those entities to audit clients of the Firm. Consequently, the Inspection team was unable to evaluate whether the Firm is in full compliance with the independence-related requirements of the Code of Ethics and SQC 1.

To Read More Download Official Inspection Report Given Below: