NFRA to Implement Annual Audits, Aims to Strengthen Corporate Governance

The National Financial Reporting Authority (NFRA) is set to implement annual inspections of major audit firms, including the Big Four, to ensure compliance and deter deviations from established standards. The move aims to combat corporate fraud by aligning with global best practices and mirroring the US Public Company Accounting Oversight Board’s periodic inspections. NFRA’s decision follows December 2023 reports highlighting deficiencies in the audit processes of prominent firms like BSR & Co. and Deloitte. The regulator’s planned annual inspections, employing data analytics, will focus on auditors serving large public companies. While not intended as a regulatory crackdown, the inspections seek to enhance transparency and accountability in accounting practices. Identified “gross negligence” may prompt further investigation, ensuring prompt remedial actions and ongoing engagement between regulators and auditors on crucial issues.