The National Financial Reporting Authority has commenced audit quality inspections of the top five firms, according to Chairman Ajay Bhushan Pandey. However, he did not disclose the names of firms under inspection.
The firms have been selected based on the volume of audits conducted by such firms, he said while addressing the press at an industry even organised by CII in Mumbai.
"We would also be looking into a couple of companies that have been audited by each firm in order to ensure that the requisite compliances have been made. The companies would be selected based on a risk-based approach," Pandey said.
The assessment would be done based on the internal policies and practises of each of these firms. The criteria of assessment would, however, change based on the changing times and on interactions with various stakeholders, he said.
On the enforcement front, he said that actions would be taken as permitted under the Companies Act. If any laxness is found, then auditors would be held accountable, he said.
Recommendations for improvement would also be made if the required standards are not met, Pandey said.
"We are looking forward to completing the inspections within three weeks. A draft report can be expected by the end of this financial year," he said.
NFRA had earlier issued guidelines on audit quality inspection in order to further improve the standard of auditors in India. It was released in a bid to identify areas and opportunities for improvement in the audit firm's system of quality control.
He also talked about the need for continuous communication with stakeholders, leveraging the digital building blocks to further strengthen the audit system, and the need for robust internal financial control.
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