AI to be a game changer in supporting cutting edge auditing techniques: 
NFRA Plans to set-up Innovation Lab or Sandbox for audit innovations

Five lines of defence (Management, Audit Committee and Independent Directors, Auditors, Investors and Regulators) are the building blocks of sound Corporate Governance                                                                    

Dr Ajay Bhushan Prasad Pandey, Chairperson, National Financial Reporting Authority while delivering the Keynote Address today at the Conference on “Financial Reporting & Governance Framework – Building Trust” organized by Confederation of Indian Industry (CII), spoke about the need to enhance trust in financial and non-financial reporting system and corporate governance for corporates and all stakeholders.

Dr Pandey emphasised about “the five lines of defence of financial reporting and sound corporate governance viz. Management, Audit Committee and Independent Directors, Auditors, Investors and Regulators”. Dr Pandey pointed that “all five lines of defence needs to be vigilant and work together to build trust”.

NFRA Chair further stated that “NFRA intends to engage with Audit Committees and Independent Directors at time of inspections to gather perspective as a part of larger efforts to improve audit quality as well as corporate governance”. Dr Pandey added that “amid the fourth industrial revolution the growing use of technology in various facets of audit ranging to detection of frauds to identification of Related Party Transactions (RPTs), NFRA is looking at establishing an Innovation Lab or Sandbox to support cutting-edge auditing techniques.”

Dr Pandey further mentioned that the investor community expect auditors to exercise professional scepticism and follow path of ‘Trust but Verify’ and thus, emphasised the need for Indian audit firms to start ‘risk-based’ pricing for their audits. Dr Pandey recognised the pace at which non-financial reporting is moving and emphasized on the need for global convergence on reporting standard and assurance standard in ensuring high-quality trustworthy Financial and Non-Financial Reporting and Corporate Governance in the Corporate Sector.

Mr N. Venkatram, Chairman, CII National Committee on Financial Reporting and Partner, Deloitte India stated that “India has the opportunity to reap the benefits presented by its demography and the digital dividend. The focus on adaptive regulation should be sustained, keeping pace with innovation and technological progress”.

Also speaking at the Conference, Mr Mark Billington BFP FCA, Managing Director International, the Institute of Chartered Accountants in England and Wales (ICAEW) stated that “ICAEW is delighted to be contributing to the CII conference this week in Mumbai on the theme of Building Trust in financial reporting, implementing the principles of sustainability and harnessing technology to strengthen reporting and governance. ICAEW see this as a direct continuation from the important work started with CII in 2023 at the B20 on responsible business. This vital platform provides the opportunity to further strengthen collaboration with CII, NFRA and ICAI, advancing ICAEW’s commitment to share insight and good practice around the world in line with their vision that Chartered Accountants enable a world of sustainable economies”.

Mr Billington observed that “India has selected ‘responsibility’ as the second word in its transformational Business Responsibility and Sustainability Reporting (BRSR) framework as the responsible business section of the BRSR particularly resonates with chartered accountants. Responsibility needs to be in the DNA of business. In that sense BRSR is not a compliance exercise – it is in the culture of a business; it is about how and why we do business”.

CA Shri Ranjeet Kumar Agarwal, President, The Institute of Chartered Accountants of India (ICAI) observed that “ICAI plays a crucial role in the nation's financial reporting and governance framework. The Institute upholds high standards of accounting and auditing practices, ensuring transparency and reliability in financial reporting, promoting good governance across the nation. The Institute actively engages with policymakers and regulatory authorities to provide inputs on financial and economic policies, where it helps in formulating policies conducive to economic development, fiscal discipline and financial stability. ICAI is working in collaboration with office of Comptroller and Auditor General of India at grassroot level with Panchayats and Municipalities to strengthen the accountability mechanism for good governance in local self-Governments”.

Speakers at the Conference, the financial luminaries lauded CII for its constant endeavours in providing a platform for deliberations on contemporary issues concerning industry. The daylong Conference deliberated on vital topics including Building Trust in Financial Reporting – Strengthening Corporate Communication; Laws and Regulations- Streamlining Requirements, Sustainability Reporting-Putting Principles into Practice, Harnessing Technology in Strengthening Reporting and Governance.

The Conference witnessed participation of 200+ delegates.

Mumbai

13 March 2024