NFRA Flags Gaps in Six Audit Firms' Quality Controls:

NFRA Flags Gaps in Six Audit Firms' Quality Controls  The National Financial Reporting Authority (NFRA) recently reviewed six major audit firms and found lapses in their quality control systems. These audit firms include Deloitte Haskins & Sells, Walker Chandiok, Singhi & Co., BDG & Co., CNK & Associates and Umamaheswara Rao & Co.

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NFRA's annual inspection checks and evaluates the processes and standards followed by the firms, such as their governance rules, effectiveness of internal control over audit quality, and systems for identifying and assessing audit risks. The inspection reports of firms like Walker Chandiok and Co. showed that they need stronger systems to ensure audit independence. One major concern was about non-audit services. NFRA has said that the non-audit services policy is applicable only for Deloitte Indian entities. In the case of Walker Chandiok, NFRA raised questions about its connection with Grant Thornton International, which can affect its independence rules.

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BDG & Co. was asked to improve documentation related to the independence declaration. The report of Singhi & Co. showed that the firm needs to take measures for monitoring personal independence declarations made by the members of the firm towards their investments. The reports of CNK & Associates suggested that the firm needs to have documentation regarding the nomination of leaders of key functional areas, like independence, audit quality, HR and monitoring. For Umamaheswara Rao & Co., NFRA said that the firm's annual partner-level independence verification was limited to a review of the partner's ITR, which does not meet the legal requirements.