To further raise the calibre of the audit profession, the National Financial Reporting Authority (NFRA) has released its audit quality inspection guidelines, for adherence by the Inspection teams.
The NFRA’s ‘Audit Quality Inspection Guidelines’ follow the same best practises that international audit regulators do. In fact, independent audit regulators all over the world can’t do their jobs without audit quality checks.
The International Forum for Independent Audit Regulators (IFIAR), which is made up of independent audit regulators from 54 different countries, says that audit regulators are required to at least do routine inspections of audit firms that are auditing public interest entities to see if they are following the relevant professional standards, independence requirements, and other rules, laws, and regulations.
In addition, many stakeholders recommended that NFRA conduct onsite inspections of the audit firms in response to its consultation paper on “Enhancing Engagement with Stakeholders,” published in 2021. This would let inspection teams learn about the systems and procedures used by such audit firms and help audit firms follow auditing standards, guidelines, etc. when doing audits.
The goal of NFRA inspections is to find areas and chances for the audit firm’s quality control system to be improved. Inspections will include a firm-wide assessment of audit quality (SQC 1) and a review of individual files on a test basis to gauge the degree of adherence to applicable auditing standards, quality control procedures, and policies. Inspections are distinct from investigations by nature, according to the NFRA. The test-check by the inspection teams, on the other hand, may in some cases be used as a basis for enforcement or an investigation, depending on what the relevant Acts and Rules say.
Audit quality inspections will give the audit firms a chance to receive feedback and make necessary course corrections while also fostering a greater understanding among all parties of the principles and practises underlying audit quality management. The goal of the inspections is to improve the financial reporting system of the whole country.
NFRA’s Audit Quality Inspection Guidelines dt. 11/11/2022