NFRA looks to enhance communication between auditors and audit panels

To enhance communication between auditors and audit committees of companies and improve audit quality, the National Financial Reporting Authority (NFRA) on Friday released the first part of the Auditor-Audit Committee Interaction Series.

 

In the course of its enforcement, review, and monitoring activities, NFRA has emphasised the importance of the auditor’s communication with those charged with governance (TCWG).

 

“A need has been felt through these activities to reinforce the ways and means of communication between the statutory auditors and the audit committees, in particular, drawing upon the requirements in the Companies Act, 2013, the two relevant Standards on Auditing (SA 260 (R) and SA 265), other related SAs, and the Standard on Quality Control,” NFRA stated.

 

 

The first part of the interaction series draws auditors' attention to potential questions that audit committees or boards of directors may ask regarding accounting estimates and judgements. It also includes aspects related to the audit of expected credit losses for financial assets and other items required by Ind AS 109, Financial Instruments.

 

“In accordance with its obligations to suggest measures for improving overall audit quality and to promote awareness of the significance of accounting and auditing standards and auditors’ responsibilities, NFRA is commencing this series of Auditor-Audit Committee Interactions,” NFRA said in a press statement.

 

In an earlier interview with Business Standard, NFRA Chairman Ajay Bhushan Pandey had underlined the importance of effective two-way communication between those charged with governance (TCWG) and the auditor.

 

“The audit committee and the independent directors should ask the right set of questions to the auditor. Auditors should display professional scepticism. Audit committee members should also question the auditor instead of simply accepting what they say. Ultimately, this kind of robust interaction between the auditors and TCWG will enhance the confidence of stakeholders and shareholders in the financial statements of the corporate sector,” he said.