Auditors must follow due process, says NFRA chief

New Delhi Auditors should follow the due process rather than just rely on expert opinions, NFRA Chairperson Ajay Bhushan Prasad Pandey said on Friday and emphasised that auditing should not be just a "ticking" exercise.

Amid instances of auditing lapses at companies and the regulator taking action against erring auditors, Pandey also said that audit documents should evidence that due process has been done. "I would like to assure the audit fraternity that we are not here to be kind of a villian, we are here to assist you and improve the system," he said while speaking at an industry event here. While asserting that trust in the financial reporting system is very important, the chief of the National Financial Reporting Authority (NFRA) said, "audit should not be just ticking audit... It should be thinking audit". The watchdog has around 7,000 companies, including unlisted ones, under its purview. According to him, it has been noticed that there is very excessive reliance by auditors on the opinions of management experts or legal opinions.

"Relying on expert opinions... and not doing the analysis required, it is not correct. You may come with the same conclusion that the expert has come... but at least your audit documentation should evidence that you have done the procedures under the SAs (Standards on Accounting). This is very very important," he said. Auditors have to follow the due process, he said while speaking at a conference on 'Financial Reporting & Control: Recent Developments and Challenges' organised by industry body Assocham.

"It is expected that if you follow the process, you may find the probability of finding fraud becomes higher. Nobody can guarantee that you can always find a fraud but if you have followed the process, then there are good chances," Pandey said. The NFRA chief referred to the views in certain quarters that auditors are not expected to find frauds at companies.