The National Financial Reporting Authority (NFRA) has introduced the first installment of its Auditor-Audit Committee Interactions series, titled Audit of Accounting Estimates and Judgments – Part 1: Expected Credit Losses (ECL) under Ind AS 109.
Through its enforcement, monitoring, and review efforts, NFRA has consistently emphasized the importance of communication between auditors and those Charged With Governance (TCWG), including Audit Committees. These activities have highlighted the need to strengthen communication channels between Statutory Auditors and Audit Committees. This initiative draws upon the provisions of the Companies Act 2013 (CA 2013), relevant Standards on Auditing (SA 260 (R) and SA 265), other applicable auditing standards, and the Standard on Quality Control (SQC).
Aligned with NFRA’s commitment to improving audit quality, raising awareness about accounting and auditing standards, and safeguarding public interest and investor protection, this series aims to enhance dialogue between auditors and Audit Committees. The series will address key accounting and auditing topics periodically.
The first communication in the series focuses on Expected Credit Losses (ECL) as mandated by Ind AS 109, Financial Instruments. It provides guidance on potential questions that Audit Committees or Boards of Directors may pose to auditors regarding accounting estimates and judgments, particularly in the context of auditing ECL for financial assets and related items.
