The National Financial Reporting Authority (NFRA) has introduced new guidelines requiring top audit firms to submit remediation plans within three months and implement corrective measures within six months of inspection findings. According to reports from Business Standard, the top six audit firms in the country will face quality inspections in FY27, including Deloitte Haskins & Sells and affiliates, SRBC & Co LLP, Price Waterhouse & Affiliates' (PW&A) Network, BSR Affiliates Network, MSKA & Associates LLP and Walker Chandiok & Co LLP. Four additional smaller auditors will also undergo quality inspections in FY27, with the top six firms having faced inspections in FY26 as well.
Under the new guidelines, NFRA's inspection reports will flag deficiencies in auditor independence, documentation requirements and compliance with quality standards. As reported by Business Standard, the regulator's expectations are conveyed to the audit industry and encourage compliance, but do not entail disciplinary action on the inspected firm or its partners. The report focuses on systemic deficiencies, weak industry practices and fosters accountability. In FY26, inspections were focused on revenue recognition and loans and advances in addition to company-specific matters.
Vishal Divadkar, Managing Partner & Head – Audit & Assurance at MSKA & Associates, confirmed to Business Standard that his firm has finalised its remediation plan as per the inspection guidelines of April 2026. According to the report, the firm has already remediated observations from earlier reports regarding strengthening of formal documentation, independence and client acceptance policies. Similarly, Walker Chandiok & Co LLP acknowledged the NFRA Inspection Report 2024 and reaffirmed its commitment to audit quality, independence and public interest, stating that no audit opinions issued by the firm have been questioned.
NFRA's new guidelines encourage audit firms to share inspection reports with audit committees of client companies, providing companies an opportunity to assess auditor functioning and decide on reappointment fitness. As reported by Business Standard, this transparency measure allows companies to make informed decisions about their auditor relationships. The enhanced framework represents NFRA's commitment to strengthening audit quality and credibility of financial statements, which is a priority for the government as the economy's appeal to investors depends on it.
In April 2025, NFRA separated functions of oversight, investigation, referring cases for disciplinary action and adjudication on disciplinary matters into four divisions, each led by a separate member with complete independence. According to Business Standard, NFRA's remediation guidance aligns with global peers, though the US Public Company Accounting Oversight Board (PCAOB) allows 12 months for remediation compared with NFRA's six-month timeline. Previous NFRA audit observations covered issues around non-audit services for Deloitte, independence requirements for Walker Chandiok, human resource policy and independence for PW&A, and monitoring of non-audit services for SRBC.
