Focus on Revenue and Independence, ETCFO
The National Financial Reporting Authority (NFRA) has expanded the scope of its annual audit inspection exercise to 10 audit firms this year, up from seven last year, with inspection reports expected by the end of December, according to a source close to the development.
“The inspection cycle began in early October and will take another few weeks to complete. Firms are given time to respond before reports are finalised, so most reports should come around the last week of December,” the source said.
An email sent to NFRA seeking confirmation on the development remained unanswered till the publication of this story.
Three more firms added this year
In addition to the Big Four networks, Deloitte, EY, PwC and KPMG and large firms Grant Thornton and BDO, NFRA has included three more firms in this year’s inspection cycle one each based in Mumbai, southern India, and Kolkata.
“Last year, NFRA had inspected seven firms. This year, it has increased the coverage to 10, adding three more to the list,” the source added.
Revenue recognition, independence and asset impairment under scrutiny
NFRA’s FY25 inspection is focused on three critical areas, revenue recognition, auditor independence and impairment of assets, considered high-risk zones for audit quality lapses.
“These areas directly test professional judgement and adherence to auditing standards,” the source said, adding that the regulator’s approach remains consistent with global inspection priorities.
Risk-based approach to firm and file selection
NFRA follows a two-step inspection framework, first identifying firms handling the largest number of public interest entity (PIE) audits, and then applying a risk-based approach to select specific audit files for detailed review.
“The process is not investigative; it is designed to enhance audit quality. Firms are given adequate time to share data and responses before the reports are finalised,” the source clarified.
Reports expected by December 2025
The regulator began its inspection process in October 2025 and most reports are expected by December-end, after firms submit their comments on the draft findings.
Last year, NFRA widened its coverage beyond the Big Five by adding Lodha & Co and MSKA & Associates to its inspection list. This year’s inclusion of three more firms takes the total to 10, underscoring NFRA’s intent to strengthen oversight of India’s audit ecosystem and deepen its audit quality review mechanism.
