NFRA's audit quality inspections flag short comings in CA firm

New Delhi, Jan 2 (PTI) The National Financial Reporting Authority (NFRA) has flagged certain lapses after the audit quality inspections of chartered accountants firm MSKA & Associates.
     In a 27-page report released on Thursday, the watchdog said there was absence of formal documentation regarding the firm's governance and management structure.
     The regulator also said that the firm could not adequately demonstrate analysis of self-review and self-interest threat as required under the Code of Ethics and provisions of the Companies Act before acceptance of non-audit services.
     The audit quality inspections of the firm was initiated in January 2024.
     MSKA & Associates is a partnership firm with 11 offices in India and has been a member of BDO international since 2013.
     Among other aspects, NFRA said its inspection team observed the need for improvement in internal review of compliance with independence requirements by the firm's personnel.
     "The firm acknowledged this as an improvement area and started taking necessary action from FY 2023-24 including discontinuing providing non-audit services by its network firms in India to its NFRA regulated audit clients," it added.
     Further, the report said the firm's control over the creation, changes, and review of Audit Work Paper (AWP) is inadequate since application used for maintaining audit documentation allows for AWP modification after final signing off without mandating the modifier to sign-off after such modification.
     "This flaw in documentation integrity also allows for signing off blank AWPs," it noted.
     With respect to review of related party transactions in one selected company, NFRA said the CA firm's audit procedures were found deficient in evaluating the fraud risk associated with the recognition of provisions for doubtful loans in respect of loans given to overseas joint venture and subsidiaries during FY 2022-23.

(This story has not been edited by THE WEEK and is auto-generated from PTI)