Disclaimer of Opinion Doesn’t Exempt Auditors from Fraud Reporting Under Section 143(12) | NFRA
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- Last Updated on 23 October, 2024
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The National Financial Reporting Authority (NFRA) has issued an order against the Engagement Partner (EP) responsible for auditing the company for FY 2017-18 due to several significant lapses. The EP failed to report potential fraud indicators and did not obtain sufficient audit evidence concerning the company’s investments. This neglect violated key auditing standards, including SA 240 and SA 500.
NFRA found that the EP lacked professional skepticism and due diligence, especially regarding substantial provisions for Expected Credit Loss (ECL) on trade receivables and advances. Furthermore, the EP improperly relied on management experts without adequate evaluation and failed to document audit procedures appropriately. NFRA emphasized that issuing a disclaimer of opinion does not absolve auditors of their statutory responsibilities, particularly the duty to report fraud as mandated by Section 143(12) of the Companies Act, 2013.
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