Be harsh when you see serious fudging, NFRA tells auditors

Statutory auditors cannot take the easy way out by issuing qualified reports where an adverse opinion is warranted, following a recent order from the national audit regulator. When a company’s accounts make mis-statements that are “pervasive and material", the auditor must issue an adverse opinion, the National Financial Reporting Authority (NFRA) said in a disciplinary order.

- Gireesh Chandra Prasad

The audit watchdog’s latest prescription is part of its drive to improve the quality of financial statements and statutory audits, as credibility of company accounts is vital for the investment climate in the country.

In a disciplinary order dealing with the FY17 statutory audit of MAN Industries (India) Ltd, a listed company, NFRA said the audit engagement partner ‘qualified’ his opinion on the consolidated financial statements, saying it reflected ‘true and fair view’ except for the effect of non-consolidation of a subsidiary. The order is against the audit partner, and not the audit firm.