Maintenance, archival and submission of Audit File to National Financial Reporting Authority (NFRA) – Points of compliance by the audit firms
The Standards on Auditing (SAs) including the Standard on Quality Control (SQC-1) define and provide guidance as to what constitutes an audit file and its evidentiary value in respect of the audit process undertaken by an auditor in support of his audit opinion/report.
Accordingly, audit firms are required to design policy, procedures and controls around maintaining the sanctity of audit files, ensuring their completeness and timely archival, including controls around authorised access to archived files.
NFRA has stated that it has observed deficiencies in the audit firms’ submission of audit files to NFRA, and their compliance with the requirements of maintenance and archival of audit files as per Standards on Auditing (SAs) and Standard on Quality Control (SQC 1).
NFRA has issued a Circular dated 16/12/2025 reiterating the provisions in the Standards of Auditing and SQC 1 including adherence to retention timelines and submission of audit file.
The NFRA has provided following points of compliance by the audit firms of the entities that fall under Rule 3 of NFRA Rules 2018:
1. Audit firms should establish adequate policy, procedures and controls over audit files as required by the professional standards and keep in mind all the relevant Indian laws and regulations including Information Technology Acts/Rules/Regulations. Accordingly, their policy and procedures should address aspects of maintenance, archival and retention of audit files.
2. Final audit files are required to be assembled and archived within the prescribed time limit in SA 230 & SQC 1 i.e., time limit for assembly of final audit files shall not be ordinarily more than 60 days after the date of the auditor’s report. Accordingly, the audit firms should be able to send the audit files to NFRA within short notice, as NFRA’s requests are ordinarily after substantial time gap from the expiry of 60 day time limit mentioned above.
3. While the audit firm’s policy on retention period for audit engagements shall not be ordinarily less than 7 years from the date of the auditor’s report, the policy must include retention beyond this 7 years period in certain circumstances such as when the audit client is subjected to certain enquiry/actions by oversight/investigative agencies.
4. Audit firms shall be required to preserve their original work papers and send audit documentation to NFRA in the manner requisitioned. Audit evidence obtained or prepared originally in electronic form shall be preserved and maintained in that form only, unless the conversion to any other form can be done without loss of evidentiary value (paragraphs 14 and 15 above). Any modification or addition or alteration to the original workpapers is violative of the requirements in the SAs and SQC 1. If the audit files have been requisitioned by NFRA, audit firms are required to retain the audit files even if the indicated retention period of seven years gets over between the requisition of audit files and completion of proceedings by NFRA.
5. Audit firms may note that any original audit documentation or parts of the original audit documentation which has been subjected to some format conversion before sending the file to NFRA or when printing some electronic form of work papers (e.g. MS-Excel Worksheets) for inclusion in the audit files maintained in paper form, do not fulfil relevant requirements of SAs and SQC 1 and cannot constitute valid audit evidence since they do not ensure authenticity, nature and timing of the audit procedures performed by the auditor.
6. Audit firms are required to note that audit files requisitioned by NFRA are required to be submitted to NFRA in complete form and prescribed manner within 7 days of receipt of the communication from NFRA to submit the Audit Files.
7. In exceptional circumstances, if extensions are necessitated, any request for extension of time needs to be made within 7 days of receipt of the communication from NFRA. Such requests should be accompanied with all the requisite details below:
(a) Description of the exceptional circumstances warranting the extension, and documentary proof substantiating the circumstances.
(b) Total number of pages of paper audit file or paper documents that form part of the audit file, and/or total volume of electronic audit file in MBs.
(c) The index page of the paper audit file and/or logical listing of the electronic audit documentation, showing the list of documents contained in the electronic audit file.
(d) Notwithstanding requirements to send the audit files in complete form as requisitioned by NFRA, advance copies of Audit Strategy and Audit Plan (Paragraph 11 of SA 300), Risk assessment summary (Paragraph 32 of SA 315), Summary of Corrected and Uncorrected Audit Misstatements (Paragraph 15 of SA 450) and Copies of all communications with Audit Committee or Board (Paragraph 23, SA 260 (revised) and Paragraphs 10 and 11 of SA 265), as available in the Audit File, are required to be sent with the extension request.
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