The National Financial Reporting Authority (NFRA) is responsible for conducting audit quality inspections in accordance with Section 132 of Companies Act, 2013 and NFRA Rules 2018. These inspections are meant to identify areas for improvement in the audit firm’s system of quality control & provide an opportunity for feedback and steps for correction.
To further ensure high quality audits and prevent conflicts of interest, the NFRA has published draft requirements for the preparation and publication of an Annual Transparency Report (ATR) by auditors/audit firms.
With effect from the financial year ending on March 31, 2023, the ATR requirements will be gradually implemented, starting with Statutory Auditors of the Top 1000 Listed Companies based on market capitalization. The ATR will include crucial details about the auditor’s operational activities, management, governance, and ownership structures, as well as the policies and procedures required to deliver high-quality audits.
The information contained in the ATR will be useful to investors, audit committees, independent directors, and the public at large. The NFRA is expected to increase investor confidence and bring about transparency and accountability in the auditing profession as an independent audit regulator, and the Centre has stated that it is consistently working in this direction.
The following information need to be disclosed by the auditors in ATR:
SW-Remarks:
The government is making a consistent effort in this direction, and to further strengthen the Authority
which is still in the evolution phase. It is expected that the recommendations and the initiative taken
by the Authority so far will address the contemporary concerns around audit and accounting quality.
