The Big Five audit firms in India are voicing concerns regarding the National Financial Reporting Authority’s (NFRA) operational methods, suggesting they may be in contravention of the Companies Act 2013, reported Financial Express.
This comes as the India’s Supreme Court is set to hear NFRA’s appeal against the Delhi High Court’s decision that annulled 11 show-cause notices issued by the audit regulator in April 2025.
In February 2025, the Delhi High Court upheld NFRA’s authority to investigate and penalise misconduct among chartered accountants (CA).
The bench, comprising Justices Yashwant Varma and Dharmesh Sharma, dismissed the petitions from individual accountants and firms, including Deloitte Haskins and Sells, concluding that their objections lacked merit.
Following the High Court’s decision, NFRA announced a reassessment of its strategy.
Auditors are now highlighting an issue with the Companies Act’s section 132 and NFRA Rules 2018, which they interpret as suggesting a separation of powers for investigation and disciplinary actions.
They argue that the NFRA’s executive body’s current role in both functions compromises neutrality and objective assessment, a concern also noted by the Delhi High Court in its recent order.
This perceived lack of neutrality by NFRA is reportedly affecting the audit firms’ ability to attract and retain talent.
CAs are said to be choosing less risky career paths over auditing roles due to the stringent regulatory environment.
An auditor from a Big Four firm, speaking on the condition of anonymity, told Financial Express that: “Regulators like NFRA have to maintain a fine balance, and ensure that if it’s holding auditors accountable for lapses, its orders should also be viewed as unbiased and in compliance with the laws.”
In December 2024, NFRA’s chairperson Ajay Bhushan Prasad Pandey acknowledged improvements in auditing standards.
