The National Financial Reporting Authority (NFRA) has announced its intention to directly engage with companies, not just auditors, in situations where issues with financial statements are identified. As part of its mandate to inspect auditors, NFRA officials will communicate with the Chief Financial Officer (CFO) and the audit committees of companies in certain cases. If deficiencies are uncovered, NFRA will refer the matter to the appropriate regulatory body. This approach is aimed at gaining a holistic understanding of financial reporting issues, recognizing that companies are ultimately responsible for their financial statements.
NFRA’s chairman emphasized the importance of effective communication between those charged with governance and auditors, highlighting the role of audit committees and independent directors in asking pertinent questions.
NFRA, established in 2018 under the Companies Act, oversees accounting and auditing standards for adoption by companies and their auditors, with a focus on listed companies.
NFRA recently released inspection reports for several audit firms, raising concerns about the violation of the Companies Act and announcing re-inspections of major firms. Additionally, NFRA plans to conduct further inspections at audit firms beyond the major players based on specific criteria.