Cases of financial irregularities continue unabated, both in India and abroad, bringing to the forefront yet again concerns over the need to improve audit quality. Reports of resignations of auditors to swift actions from various regulatory bodies against auditors continue to grab headlines on a routine basis these days. There are several issues that need to be debated thoroughly for bringing out sustained improvement in the quality of auditing and the overall corporate governance. What impact does it have on the overall audit market environment in the country? How the issues like auditor independence, audit fees, manner of appointment impact audit quality? One also needs to examine what has been the role of company’s management, audit committees, independent directors, rating agencies and so on and so forth. There is a need for concerted efforts to address systemic issues that have a bearing on the entire structure. We also need to learn from international experience of dealing with audit failures.
Earlier, Ministry of Corporate Affairs had clarified to QRB that, in view of Section 132(2) of Companies Act, 2013 r/w Rule 9(4) of NFRA Rules, 2018, the issue of QRB reviewing audits of companies/bodies corporate specified under Rule 3 of NFRA Rules, 2018 will only arise in case a reference is so made to QRB by NFRA, and not otherwise. Accordingly, QRB would now be able to initiate reviews of quality of audit services provided by members of the Institute in respect of entities other than those specified under Rule 3(1) of NFRA Rules, 2018, namely, private limited companies, unlisted public companies below the thresholds specified under Rule 3(1) of NFRA Rules, 2018, other entities not specified under Rule 3(1) of NFRA Rules, 2018; and those referred to QRB by NFRA under Rule 9(4) of NFRA Rules, 2018. However, in the meanwhile, QRB has also been completing its on-going reviews of top listed and other public interest entities which were in process. We are also revisiting our Procedure for conducting quality reviews aligning it with our revised mandate and in view of the experience gained during reviews.
During financial year 2018-19, QRB completed its reviews of audit quality of 51 entities in India. The present report highlights the key findings observed in the audit quality reviews conducted during financial year 2018-19 indicating our approach for review, key trends, our expectations and other focus areas. I hope the concerned stakeholders will find this Report useful. Now, it is for the concerned Audit firms to take remedial actions for the deficiencies highlighted as well as identify the root causes thereof and improve themselves.
Download Report on Audit Quality Review-2018-19 –Direct Link
