Government To Issue Form Which Will Require Auditors To File All Details Including Adverse Comments, Observations

The government is set to notify a new form that will require auditors to file key findings about companies and all adverse comments and observations, among other details.

The government will shortly notify the form through which auditors will have to file annual reports to the National Financial Reporting Authority (NFRA).

Incidentally, all listed companies, unlisted public companies with a paid-up capital of Rs 500 crore or more, or a turnover of Rs 1,000 crore or more, or loans, debentures and deposits of Rs 500 crore or more, as well as banking, insurance and power companies come under the purview of NFRA.

Auditors and audit firms would be required to mention findings and observations about accounts of companies under the NFRA’s watch. The idea behind the step is that separate filings would allow greater transparency and ease of access to audit findings.

It may be noted that Indian policymakers had been planning to increase disclosures by auditors for some time.

In the US, auditors are required to make annual disclosures, including lists of companies audited and details of any past disciplinary action against members of the firm. They must also disclose their risk assessments of companies.

The government’s latest move has been prompted by cases like the scam at IL&FS which revealed severe shortcomings and raised questions over the quality of audits and management interference.