Inspection reveals shortcomings of auditor affiliates

SRBC (SR Batliboi), Walker Chandiok (WCCL) and Deloitte Haskins & Sells (Deloitte) have once again brought to light critical issues such as auditor independence, the provision of non-audit services to audit clients, deficiencies in quality control frameworks, and conflicts of interest, raising concerns about whether top audit firms are responding quickly enough to meet regulatory requirements.
A key concern for the regulator, the National Financial Reporting Authority (NFRA), has been that despite affiliations with global networks, each firm operating locally has not aligned its internal audit policies and procedures with Indian regulatory norms, particularly Sections 141 and 144 of the Companies Act and the ICAI Code of Ethics.

Section 141 addresses the eligibility, qualifications, and disqualifications of auditors, whereas Section 144 prohibits auditors from providing certain services to the company or its subsidiaries. They reviewed SRBC in 2024 for compliance with previous findings and evaluated three FY23 audits, focusing on revenue-related internal controls, related-party transactions, and non-financial asset impairment. The regulator found that despite being a member of Ernst & Young Global since 2013, SRBC's policies fail to consider their relationships with network firms.

The audit firm had entered into agreements covering business support, shared facilities, quality and risk management, and knowledge sharing — indicating deep working relationships with the global network. The regulator said, «A