India’s audit regulator has released 4 inspection reports pointing to key deficiencies across audit firms affiliated with PwC, BDO, EY and KPMG, while also noting improvements made since earlier reviews.
The National Financial Reporting Authority (NFRA) said the inspections identified issues in audit independence, internal governance, and scrutiny of related-party transactions. “These inspections are a tool to provide audit firms with actionable regulatory feedback much earlier in the financial reporting cycle to help them enhance their quality control systems,” the regulator stated. “Overall inspections assist in the goals of strengthening overall financial market integrity and investor and creditor protection,” it added.
The reports cover 4 firms—Price Waterhouse Chartered Accountants LLP and Price Waterhouse & Co Chartered Accountants LLP; SRBC & Co; MSKA & Associates; and BSR Affiliates Network. The inspections assessed governance frameworks, internal controls over audit quality, and systems for identifying audit risks. Deficiencies were flagged for corrective action, with more reports expected soon.
PwC affiliates:
NFRA flagged issues related to independence of 6 partners and recruitment policies. It also identified lapses in audit procedures, including investment impairment assessments, loans to subsidiaries not evaluated at arm’s length, missing related-party disclosures, and modifications made after signing audit reports. Weak documentation for expense controls was also noted.
MSKA & Associates (BDO affiliate):
The firm was asked to strengthen controls over non-audit services and ensure mandatory re-sign-off for post-report changes. NFRA also called for the formation of a whistleblower committee and better audit evaluation of revenue and receivables. The regulator highlighted the need for stronger root cause analysis.
“We undertook significant remedial actions following our findings from last year, and remain committed to enhancing audit quality, ensuring highest levels of integrity and competence in our audit engagements,” said Vishal Divadkar.
SRBC & Co (EY affiliate):
NFRA said monitoring mechanisms for independence policies need improvement. It also flagged gaps in evaluating arm’s length pricing in related-party transactions.
“We are committed to performing high-quality audits and we consider the insights from the NFRA’s inspection process important to maintaining those high standards,” a spokesperson said.
BSR Affiliates (KPMG affiliate):
The firm was largely compliant with independence norms but needs stronger policies on non-audit services for past clients and improved root cause analysis.
“We recognize that the inspection framework plays a vital role in strengthening audit quality,” a spokesperson said.
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