Audit unreliable, invalid if files not submitted: NFRA
NEW DELHI : Absence of audit documentation and failure to submit audit files to the regulator is clear evidence that the audit is unreliable and invalid, National Financial Reporting Authority (NFRA) has said in a regulatory order. NFRA said not maintaining audit files is viewed seriously by global regulators including Public Company Accounting Oversight Board of the US.
NFRA’s ruling taking the alleged non-submission of audit files as professional misconduct came in the case of a statutory audit of a company Bartronics India Ltd for the 18 months up to 31 March 2015 by a Hyderabad based auditor. “Absence of audit documentation or failure to submit the audit file to NFRA, is a clear evidence that the auditor failed to obtain reasonable assurance about whether the financial statements as a whole were free from material misstatement and that the auditor’s opinion…was without any basis and unreliable and hence, invalid," the audit watchdog said in the order.
The auditor’s opinion about financial statement is part of independent auditor’s report. Emails sent to the company and to the auditor on Friday seeking comments for the story remained unanswered at the time of publishing.
Although NFRA’s disciplinary orders and audit quality review reports are specific to individual companies and their statutory auditors, these carry a larger message to the corporate sector and to the audit fraternity about the regulator’s expectations from company executives who prepare financial statements and the statutory auditors who sign off on them. NFRA’s orders seek to ensure that auditors follow not only Companies Act provisions, but also the audit standards, code of ethics and other norms set out by the profession’s self-regulator and
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