NFRA flags audit lapses by Walker Chandiok, releases inspection report
Dec 29, 2023
Synopsis
The National Financial Reporting Authority (NFRA) has issued an inspection report on audit firm Walker Chandiok & Co LLP (WCCL), highlighting lapses such as the lack of integration between electronic and paper files and the provision of non-audit services prohibited under the Companies Act, 2013. The report also highlighted the existence of related entities of WCCL, Grant Thornton Bharat LLP (GTBL), Grant Thornton Advisory Private Ltd (GTAPL) which are part of a large global "GTIL Network" as per the standard on Quality Control (SQC) 1.
The National Financial Reporting Authority (NFRA) on Friday came out with an inspection report on audit firm Walker Chandiok & Co LLP (WCCL), flagging lapses, including the “lack of integration between electronic and paper files” and rendering of non-audit services prohibited under the Companies Act, 2013, in two instances.
The regulator said the audit documentation of the firm comprises electronic audit documentation and physical files. The lack of integration between electronic and paper files poses risks of non-compliance with audit standards and quality control and “raises concerns about the reliability of audit documentation”, it added.
It said Grant Thornton Bharat LLP (GTBL), Grant Thornton Advisory Private Ltd (GTAPL) and Grant Thornton International Limited (GTIL) are related entities of WCCL either “directly or indirectly” as per explanation to the Section 144 of the Companies Act, 2013. These entities are also part of a large global “GTIL Network” as per the standard on Quality Control (SQC) 1.
“However, the firm (WCCL) denied the existence of direct or indirect relationship and network,” the NFRA said.
It further said that WCCL, controlled by Vinod Chandiok, declared in its filings with the Public Company Accounting Oversight Board (PCAOB) that it had no audit related memberships, affiliations or similar arrangements with any other entity. However, GTBL, which is controlled by his son Vishesh Chandiok, has declared in its filings with the PCAOB that it had “audit related memberships, affiliations or similar arrangements” with WCCL and the global network namely GTIL, it added.
Responding to ET on the NFRA report, a WCCL spokesperson said, “We believe in accountability and integrity towards our stakeholders and the significant professional responsibility that has been entrusted on us.”
“We have provided our responses to the NFRA report in detail which is available publicly and confirm our position of not providing any prohibited non-audit services to our audit clients. We support NFRA’s mission to protect public interest," it said, adding the firm is committed to the highest standards of financial reporting.
The regulator initiated an audit quality inspection of WCCL in December 2022 and reviewed quality controls adopted by the firm to evaluate its auditing standards.
This is the latest in a series of reports by the audit regulator this month, also involving firms such as BSR & Co, Deloitte Haskins & Sells, SRBC & Co and Price Waterhouse Chartered Accountants.
The NFRA said WCCL did not provide, during the inspection, details of GTIL Network entities, and non-audit services provided by those entities to audit clients of the firm. “Consequently, the inspection team was unable to evaluate whether the firm is in full compliance with the independence-related requirements of the Code of Ethics and SQC 1,” it added.
As for the prohibited non-audit services, the NFRA said it observed that in one case, WCCL provided “consolidated procedures for certain related entities of an auditee company for which it was the statutory auditor, including of the consolidated financial statements”.
“In another case, assurance on related party transactions was provided to the board of directors (by WCCL), and later on such transactions were audited by the firm, leading to self-review threat,” the regulator added.
[The Economic Times]
