Emphasising the importance of financial integrity, audit regulator National Financial Reporting Authority's chief Ajay Bhushan Prasad Pandey on Friday said auditors should ask questions from a company's management to ensure that the financial statements are true and fair.
He also said that audit committees of companies should read the disciplinary orders passed by the NFRA as there are many lessons that can be learnt from them.
The watchdog has been taking steps to improve the overall audit quality as well as acting against erring auditors.
Speaking at a conference organised by industry body Assocham in the national capital, Pandey said financial integrity has become more important than ever for the country's corporates and that audit committees are at the centre of the high quality financial reporting framework, which is a key element for sound corporate governance.
He noted that audit committees must read the NFRA's disciplinary orders and there are a number of lessons to be learned.
"What has been done to ensure that financial statements are true and fair? When you approve related party transactions, what were the questions you asked? Those things become very very important," he said.
"What are the internal financial controls... (on) all those things you have to ask questions. In some cases, you will not get answers but at least you have the questions and it has been documented," Pandey said.
Further, the NFRA chief said that he has noticed a pattern of misconduct and fraudulent activities.
He also suggested having a database that will show the list of failures in terms of auditing that have been pointed out.
According to Pandey, auditors should seek more time from a company's management to make presentations and that could help guard against irregularities happening at the company concerned.
Ashok Haldia Chairperson of the Assocham Task Force for Accounting Standards, Sustainability Accounting and Integrated Financial Reporting said that quality review and inspections carried out by regulators should also reflect on the responsibility and work done by the audit committee along with those of the auditors.
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