Indian Auditors To Publish Annual Transparency Report: Regulator

In a bid to enhance transparency in the workings of audit firms, the National Financial Reporting Authority has published draft requirements regarding preparation and publication of the Annual Transparency Report for auditors or audit firms.

In its invitation circular, the regulator said, "in accordance with Rule 8(2) of the NFRA Rule 2018, NFRA considers it appropriate to prescribe publication of Annual Transparency Report containing certain critical information about the auditor’s operational activities, management, governance and ownership structures, policies and procedures necessary to deliver high-quality audits, etc."

The requirements on the contents of the ATR are currently open for public comments until Feb. 16.

The details contained in the ATRs are expected to serve as useful information to investors, audit committees, independent directors and the public at large.

The requirement of an ATR would be implemented in a gradual manner across auditors who practice with public interest entities falling within the purview of the NFRA, the circular said. It will start with the auditors performing audit of the top 1,000 listed companies, by market capitalisation, from the current financial year.

The ATR requirements are expected to be on the lines of the contemporary international best practices implemented by a few prominent independent audit regulators in other jurisdictions.

The need arises given regulators and oversight authorities in the EU and Australia require auditors doing an audit of public interest entities to prepare and publish information, in the form of transparency reports, on an annual basis. Audit firms that operate in those jurisdictions have already been publishing the transparency reports as well.

A committee of experts, appointed by the Ministry of Corporate Affairs in 2018, in line with a Supreme Court direction had also recommended inclusion of a similar requirement for every auditor and audit firm operating in India, as a member of an international network.

The NFRA is an independent regulatory authority set up in 2018 under the Companies Act to regulate the auditing profession and the Indian accounting standards.