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Brief Analysis of
Recent NFRA Orders

By:
Pankaj Tiwari
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Few Trigger points for action by NFRA

Auditor had resigned Irregularities observed Information received Information received On receipt of Information received
within one-month after by the FRRB board from SEBI regarding from SEBI pertaining to information from ROC from SFIO
issuing a Qualified financial irregularities overstatement in regarding investigation
Independent Auditor reporting of sales and carried out by RD
report purchases

CA Pankaj Tiwari
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Recent action from NFRA

Time Period No. of Address to Amount of No. of

 NFRA was constituted on 1st October Orders Penalty Years
Debarred
2018 and till March 2023 it had issued 6
orders. Since March 2023, NFRA has Individual Rs.1 lakhs 1 to 10
issued 25 orders which has highlighted Chartered to Rs.10 years
certain lapses in carrying out the 31st March to Accountant lakhs
statutory audits of certain entities. 3rd August 23
CA Firm Rs.50 lakhs 2 to 4
to Rs. 2 years
crore

CA Pankaj Tiwari
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Observations on Standards on Auditing (SA)

Audit Reporting Quality Control

10% 5% ❑ Quality Control (SQC-1 & SA 220)
Using Work of Others
2%
❑ Principles and Responsibilities (SA
200-299)
Principles and
Audit Evidence Responsibilities
❑ Risk Assessment and Response
23% 34%
(SA 300-450)

❑ Audit Evidence (SA 500-580)

Risk Assessment and
Response
26%
❑ Using Work of Others (SA 600-
620)

❑ Audit Reporting (SA 700-720)

CA Pankaj Tiwari
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Few areas of audit Lapses

Engagement Quality Control Review ( EQCR )

Related Party Transactions ( RPT )

Independence and Going Concern

Audit Documentations

Accounting Issues

Other issues

CA Pankaj Tiwari
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Engagement Quality Control Review ( EQCR )

No formal appointment of EQCR in case of Audit of Listed Entities

EQCR lack requisite technical expertise and experience to perform assigned role of evaluating work

No appointment of EQCR considering low volume of transactions in the company

Inadequate documentation of EQCR process-only one checklist maintained by the audit firm

Delay in review of ROMM, preliminary analytical review and materiality by EQCR

Inadequate review of Workpapers- Specifically leading to Qualification/ EOM para in Audit Report

CA Pankaj Tiwari
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Related Party Transactions ( RPT )

Failure in evaluation of transaction at Arm length price- advances given without any rationale & documentation

Partial Disclosure of RPT- loan converted into capital advances not disclosed in RPT disclosure

Non – identification of party to whom 100% sales was made as RPT- relied upon the MRL and PY FS for identification

Non - disclosure of loans to Related Party u/s 186 (4) in financial statements

Reduction of RPT outstanding balances by book entries through cheques in hand subsequently cleared by way of
fresh advances to parties

Differences in the transaction amount reported by the group companies and RPT disclosure

CA Pankaj Tiwari
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Independence and Going Concern

Independence: Going Concern:

Independent confirmations not obtained Documents regarding evaluation of
from some of the team members Going Concern not kept in audit file
Client acceptance/continuance form Inadequate disclosure made in notes
not kept in record as per SQC 1 relating to GC as referred in Audit Report

CA Pankaj Tiwari
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Audit Documentation

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Accounting Issues

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Other Issues

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CA Pankaj Tiwari
pankaj.cnk@gmail.com
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The information given in this document provides a bird's eye view on the recent orders issued by NFRA. Whilst every care
has been taken in the preparation of this publication, it may contain inadvertent errors for which I shall not be held
responsible.