In an effort to improve audit quality, the National Financial Reporting Authority (NFRA) is set to release a series of papers addressing critical areas of statutory audits. NFRA Chairman Ajay Bhushan Pandey told FE that seven such papers are planned for release over the next 2–3 months.
“Based on our experience and the current gaps observed in overall auditing, we have identified critical areas requiring attention from auditors, audit committee members, independent directors, and other board directors. These papers are aligned with international practices followed by regulatory agencies like the PCAOB,” Pandey said.
“Keeping in view NFRA’s objectives of protecting public interest and investor protection, NFRA is commencing with this series of auditor-audit committee interactions, which will be issued on significant areas of accounting and auditing, from time to time,” the paper said.
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The first paper in the series, titled Auditor-Audit Committee Interactions Series 1, highlights key areas where audit committees or board directors should engage with auditors, particularly regarding accounting estimates and judgments.
“Within that, this communication includes aspects pertaining to audit of expected credit losses (ECL) for financial assets and other items as required by Ind AS 109, financial instruments,” the paper said. The paper further said that auditors and audit committees work towards the common goals of ensuring audit quality and integrity of financial statements.
“Section 177 of Companies Act 2013 requires the audit committee to review the financial statements and auditors report thereon; review and monitor the effectiveness of the audit process; valuation of undertakings or assets of the company; and evaluation of internal financial controls and risk management system,” it said.
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