The National Financial Reporting Authority (NFRA) has constituted an advisory committee on Audit Quality, Assurance and Technology to address emerging risks in audit practices. According to reports from Business Standard, this nine-member committee comprises professionals, CFOs, audit committee members and technology experts. The committee includes Shyamala Gopinath, former deputy governor, Reserve Bank of India and independent director; Bharat Goenka, CFO, Hindalco Industries; M P Vijay Kumar, executive director and CFO, Sify Technologies; Sanjeev Sood, chief assurance executive, Axis Max Life Insurance; and Robin Banerjee, chairman, Nucleon Research Pvt Ltd, among others. As reported by NDTV, the committee comprises eminent experts, representing various stakeholder groups of NFRA -- professionals, CFOs, audit committees, independent directors, technology experts, regulators and industry. Notably, the panel includes Ananth Narayan, former Whole Time Member, Securities and Exchange Board of India (Sebi), bringing regulatory expertise to the committee's composition.
The committee will provide advice on AI, automation and cybersecurity risks arising from the use of data analytics, automation, artificial intelligence and machine learning in audit conduct. As reported by Business Standard, the committee will examine audit implications of audited entities' technology environments, including enterprise resource planning (ERP) systems, automated and application controls, application programming interfaces (APIs), system logs, digital-payment systems and blockchain. The panel will also address cybersecurity and cloud-related risks affecting audit platforms, the integrity and confidentiality of audit documentation, and the security of client data. According to NDTV, the committee will give advice on governance of, and the risks and practical implementation issues arising from, the use of data analytics, automation, artificial intelligence and machine learning in the conduct of audits. Recent developments show that AI can compare documents, extract requirements, highlight changes, and prepare audit trails for regulatory and technical documents, particularly useful for energy and infrastructure projects with extensive permits and contracts.
The advisory panel will provide recommendations on implementation and consistent application of the Standards on Auditing, the Standards on Quality Control and Quality Management, related assurance and review standards, and applicable ethical requirements. According to Business Standard, the committee will give advice on identification of audit areas, sectors and emerging risks that may warrant thematic or sectoral focus. This includes suggestions on questions arising from their adoption in practice and the development of sector-specific accounting guidance for key sectors such as oil, energy and insurance. The committee's expertise will be particularly valuable as AI transforms production economics in research, structuring, translation, and metadata creation, though it increases pressure on quality and credibility of audit documentation.
This marks the third such committee set up by NFRA, following the Technical Advisory Committee constituted in 2020 whose term ended in December 2022. As reported by Business Standard, in July 2024, NFRA had constituted an Advisory Group of eminent experts to advise on auditor-audit committee resources. The current committee represents NFRA's continued effort to strengthen its advisory framework for audit quality and technology-related challenges in the financial reporting landscape.
A parliamentary committee report tabled in the monsoon session has recommended that NFRA should undertake sectoral studies to identify industry-specific accounting and audit challenges. According to Business Standard, the government has taken various steps to strengthen NFRA in the proposed Corporate Laws Amendment Bill, aiming to bring the regulator on par with other regulators such as Sebi, the Competition Commission of India and the Insolvency and Bankruptcy Board of India. The Bill empowers NFRA to make regulations that govern its functioning and delegate its powers and functions to any of its members or officers.
