The National Financial Reporting Authority (NFRA) has emphasized that audit committees of listed companies must actively safeguard the independence of auditors to maintain transparency and accountability in financial reporting. Speaking at a corporate governance summit, NFRA Chairperson Ajay Bhushan Pandey underlined that while regulatory frameworks exist, the true responsibility for ensuring fair audits lies with companies and their boards.
Pandey noted that audit committees should not merely act as oversight bodies but must play a proactive role in ensuring that auditors are free from management influence. Highlighting past instances where compromised independence led to corporate misreporting and scandals, he stressed that an effective audit process is the cornerstone of investor trust and market stability.
The NFRA chairperson further stated that rotation of auditors, robust internal checks, and transparent disclosures are essential safeguards against conflicts of interest. He pointed out that companies often view auditors as service providers, but their role is far more critical in ensuring financial integrity, stakeholder confidence, and long-term sustainability.
In addition, NFRA has been closely monitoring audit practices and has recommended tighter compliance frameworks to prevent lapses. Pandey urged companies to prioritize ethical standards over short-term gains, reminding boards that independence in auditing is not just a legal requirement but also a fiduciary duty to shareholders and the public.
Key Highlights
NFRA Chairperson Ajay Bhushan Pandey calls on audit committees to safeguard auditor independence.
Audit committees must ensure freedom from management interference.
Rotation of auditors, internal checks, and transparency suggested as safeguards.
Independence of auditors is crucial for investor trust and market credibility.
Who Should Take Action – Specific Advice
Audit committees of listed companies must review their current practices, ensure independence protocols are in place, and implement mandatory rotation of auditors. Boards should prioritize transparency in disclosures and treat auditor independence as a strategic governance issue, not just a compliance formality.
India Advocacy Insight
Strengthening the independence of auditors is critical to building credible financial markets in India. At India Advocacy, we believe that businesses which embed strong governance and audit integrity will not only attract global investors but also safeguard themselves against reputational and regulatory risks.
