NFRA to introduce Annual Transparency Report by the Audit Firms

Source: The post is based on the article “NFRA to introduce Annual Transparency Report by the Audit Firms” published in PIB on 15th January 2023.

What is the News?

The National Financial Reporting Authority(NFRA) has proposed introducing Annual Transparency Reports(ATR) requirements for audit firms.

What is the National Financial Reporting Authority(NFRA)?

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Why has NFRA proposed ATR requirements for audit firms?

The effort is aimed at enhancing the transparency about management and governance of audit firms and their internal policy framework to ensure high-quality audits and prevent conflict of interest by maintaining independence.

How will the ATR requirements for Audit firms be implemented?

The ATR requirements are proposed to be implemented in a gradual manner for PIEs (Public Interest Entities) starting with statutory auditors of top 1,000 listed companies (by market capitalization) with effect from the financial year ending on 31 March 2023.

An audit firm will have to publish the ATR within three months from the end of each financial year.

The ATR report will provide certain critical information about the auditor’s operational activities, management, governance and ownership structures, and policies and procedures necessary to deliver high-quality audits etc. 

The information contained in the ATR will be useful to the investors, audit committees, independent directors and the public at large.