India’s National Financial Reporting Authority (NFRA) has initiated a series titled ‘Auditor-Audit Committee Interactions’, with its first part focusing on ‘Expected Credit Losses’ (ECL) under Ind AS 109.
This move is part of NFRA’s strategy to suggest improvements in audit quality and to promote awareness of accounting and auditing standards.
Ind AS 109 sets the standards for the recognition and measurement of ECL, while Ind AS 107 details the disclosure requirements.
The series aims to strengthen the communication between statutory auditors and audit committees, drawing from the Companies Act 2013, Standards on Auditing, and the Standard on Quality Control.
During NFRA’s enforcement, review, and monitoring activities, the auditor’s communication with those charged with governance (TCWG), including audit committees, has been emphasised.
The latest initiative aims to enhance understanding of key accounting and auditing areas while supporting NFRA’s goals of protecting public interest and ensuring investor protection.
The first instalment of the series highlights potential questions that audit committees and boards of directors may raise with auditors regarding accounting estimates and judgments.
It also emphasises the audit of ECL for financial assets as mandated by Ind AS 109.
The NFRA’s release states that: “Under the ECL approach, impairment loss recognition begins from the moment that a financial asset is accounted for, and not at a later stage based on indications/objective evidence of occurrences of losses, which is the case under the incurred loss approach.
‘This ECL approach of Ind AS 109 is based on the international standard IFRS 9 which was introduced to remedy the weaknesses observed during the global financial crisis (2007-08).”
In November 2024, NFRA finalised and recommended a comprehensive set of auditing standards to the central government for Limited Liability Partnerships (LLPs).
The authority proposed the adoption of 40 standards on auditing and related standards on quality management, tailored for LLPs.
“India’s NFRA launches ‘Auditor-Audit Committee Interactions’ ” was originally created and published by The Accountant, a GlobalData owned brand.
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