Majority of auditors not filing annual returns, says NFRA

The figure reported by NFRA indicates a large section of the audit profession under its ambit are defaulters. A database for FY21 showed that 2,079 auditors are under NFRA’s purview.

The audit watchdog said that in FY19, 617 audit firms did not filed returns in form NFRA-2 and in FY20, a total of 1,684 audit firms did not file their returns. NFRA also brought out separate lists of defaulting auditors that have signed the financial statements of unlisted, listed and banking and insurance companies. They include both individual professionals and audit firms.

Defaulters are liable to a fine of up to ₹5,000, and where the contravention continues, a further fine of up to ₹500 every day after the first, as long as the contravention continues.

NFRA-2 form is an annual return to be filed by the audit firm giving a host of details ranging from its registration and PAN number to details of fee received, details of the partners and the number of employees.

The auditor also has to report if the firm has quit the audit assignment of any company in the previous three years, or has withdrawn the audit report on financial statements or has withdrawn its consent to use its name in a report in the preceding three years. The auditor also has to make a statement of the quality control policies it has put in place for the reporting period. These are significant disclosures to be made by the auditor. Auditors are required to file their annual returns before 30 November every year. The audit watchdog said that an intimation is also being sent to defaulting audit firms and auditors.

The regulator said non-filing of NFRA-2 form is a non-compliance under NFRA rules which attracts penal provisions. “It is also reminded that the due date for the reporting period 2021-22 (audit reports signed during the period 1 April 2021 to 31 March 2022) is 30 November 2022. Auditors/firms are advised to file NFRA-2, if not already done so,” NFRA said.