New Delhi: As a step towards enhancing the transparency about management and governance of audit firms and their internal policy framework to ensure high quality audits and preventing conflict of interest by maintaining independence, the National Financial Reporting Authority (NFRA) has published draft requirements regarding preparation and publication of Annual Transparency Report (ATR) by auditors or audit firms.
These ATR requirements are on the lines of the contemporary international best practices implemented by certain prominent Independent Audit Regulators in other jurisdictions. Rule 8(2) of the NFRA Rules 2018 empowers the NFRA to require an auditor to report on its governance practices and internal processes designed to promote audit quality, protect its reputation and reduce risks including risk of failure of the auditor and may take such action on the report as may be necessary.
In accordance with Rule 8(2) of the NFRA Rule 2018, NFRA intends prescribing publication of Annual Transparency Report containing 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 public at large.
NFRA has also decided to seek public comments or suggestions on the contents of the ATR by 16 February 2023.