NEW DELHI: To enhance communication between auditors and audit committees, the National Financial Reporting Authority (NFRA) has launched the Auditor-Audit Committee Interaction Series.
The initiative, aimed at improving audit quality, underscores the critical role of robust dialogue between statutory auditors and those charged with governance (TCWG), such as audit committees and boards of directors.
Key areas of focus
The first part of the series, released on Friday, emphasises potential questions that audit committees and boards may ask auditors regarding accounting estimates and judgments.
It also addresses key elements of the audit process, including the audit of expected credit losses for financial assets and other requirements under Ind AS 109 – Financial Instruments.
NFRA’s initiative draws upon the requirements of the Companies Act, 2013, as well as key standards, including SA 260 (Revised) and SA 265, which deal with the auditor’s communication with TCWG and deficiencies in internal control, respectively.
The framework also incorporates principles from other relevant Standards on Auditing and the Standard on Quality Control.
In its enforcement and monitoring activities, NFRA has consistently highlighted the importance of effective communication between auditors and TCWG. This series aims to reinforce such interactions, fostering accountability and trust in the audit process.
Awareness and audit quality
The NFRA stated in a press release that the series aligns with its mandate to improve overall audit quality and raise awareness about accounting and auditing standards.
By encouraging meaningful dialogue, the initiative seeks to ensure that audit committees and independent directors engage auditors with greater professional skepticism, rather than merely accepting their findings at face value.
NFRA Chairman Ajay Bhushan Pandey, has on many occations, underscored the need for a dynamic two-way interaction.
“The audit committee and independent directors must ask the right questions, challenging auditors to exhibit professional skepticism,” he said. “This robust engagement will ultimately enhance stakeholder confidence in the financial statements of the corporate sector.”
The road ahead
With the launch of this interaction series, NFRA aims to create a framework that bridges communication gaps between auditors and governance bodies. This effort is expected to lead to more transparent and reliable financial reporting, benefitting stakeholders across the corporate landscape.
