NFRA finds certain lapses in audit quality of network entities of Big 4
NFRA) has found certain lapses in the auditing-related activities of the network entities of the Big 4 during detailed audit quality inspections. The watchdog carried out audit quality inspections of the firms — Deloitte, Haskins & Sells LLP, BSR & Co LLP, SRBC & Co LLP and Price Waterhouse Chartered Accountants LLP.
BSR & Co LLP and SRBC & Co LLP are the network firms of KPMG and EY, respectively.
PwC, Deloitte, EY and KPMG are the four major global entities in the auditing space and they are also known as 'Big 4'.
The inspections of the audit firms were started in December last year and covered various aspects, including review of firm-wide quality controls evaluate their adherence to Standards on Quality Control (SQC-1) and selected audit documentation of the annual statutory audit of financial statements for the year ended March 31, 2021, according to four separate reports released by NFRA on Friday.
In the case of Deloitte, Haskins & Sells LLP, the regulator has flagged six deficiencies, including that the audit firm did not reassess and recategorise audit risk in one engagement as required and its own policy manual.
NFRA has made six observations with respect to BSR, including that absence of formal documentation, and inadequate explanations regarding the firm's governance and management structure indicate non-compliance with SQC 1's Leadership Responsibilities for Quality.
Among others, it said the audit firm did not provide, during this inspection, details of KPMG network entities, and non-audit services provided by those entities to audit clients of the firm.
