Auditors of companies supervised by the National Financial Reporting Authority (NFRA) will have to reveal their findings distinctly as government seeks to focus on audit-related concerns and transparency.
The government has decided to notify a new form where auditors will require to file key findings in respect of companies and any unfavourable remarks and observations including other details. The form has been designed along the lines mandated by the Public Company Accounting Oversight Board in the US.
This move came into action by judging the scam at IL&FS that unearthed massive shortcomings and questions over the audit quality and interference of management were raised.
All listed companies, unlisted public companies All listed companies, unlisted public companies with a paid-up capital of Rs 500 crore or more, or a turnover of Rs 1,000 crore or more, or loans, debentures and deposits of Rs 500 crore or more, as well as banking, insurance and power companies come under the scope of NFRA.
The authority which was formed on October 1, 2018, is responsible for the establishment and enforcement of accounting and auditing standards and the quality of service of auditors.
The government believes that separate filings would bring in broader transparency and ease of access to audit findings.
Policymakers have been considering on increasing disclosures for auditors. The Ministry of Corporate Affairs (MCA) initiated debarment proceedings against 9 auditors, involved with the management of IL&FS in hiding financial defaults.
In the US, auditors are required to make annual disclosures, including list of companies audited and also the details of any past disciplinary action against members of the firm. It is mandatory to disclose risk assessments of companies.
The government wants to implement these practices in India to address the concerns caused by recent corporate frauds like IL&FS scam.
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