Audit Committee Meetings Should Not Be A Formality: NFRA Chairman

Ajay Bhushan Pandey, Chairman of the National Financial Reporting Authority (NFRA), highlighted the regulator’s concern over instances where meetings between auditors and audit committees have become mere formalities, emphasising the need to rectify this practice.

Pandey has said the scheduled annual inspections of major audit firms will enhance compliance with auditing standards and safeguard the interests of investors and shareholders. In an interview with The Economic Times, Pandey also mentioned the NFRA’s intention to engage in direct discussions with Audit Committees and Independent Directors of listed companies.

Addressing concerns about the inspections, Pandey clarified that this should not be viewed as a regulatory crackdown but rather as part of the NFRA’s mandate under Section 132 of the Companies Act to monitor and enforce compliance. He stressed the importance of protecting shareholders’ interests, especially as India aims for significant economic growth, and highlighted the necessity of accurate financial reporting and good corporate governance.

Regarding the focus of the inspections, he explained that they aim to monitor audit firms’ practices, particularly regarding quality control and independence. He emphasised the importance of effective communication between auditors and governance bodies and highlighted the need to avoid conflicts of interest related to non-audit services.