National Financial Reporting Authority (NFRA) Chairperson Ajay Bhushan Pandey on Wednesday said it has plans to set up an Innovation Lab or Sandbox for audit innovations to “support cutting edge auditing techniques”. Pandey said NFRA intends to engage with Audit Committees and Independent Directors at time of inspections to gather perspective as part of larger efforts to improve audit quality as well as corporate governance. Amid the fourth industrial revolution and the growing use of technology in various facets of audit ranging from detection of frauds to identification of related party transactions (RPTs), NFRA is looking at establishing an Innovation Lab or Sandbox to support cutting-edge auditing techniques, Pandey said at a Confederation of Indian Industry (CII) summit. Pandey said the investor community expects auditors to exercise professional scepticism and follow path of ‘Trust but Verify’ and emphasised the need for Indian audit firms to start ‘risk-based’ pricing for their audits. NFRA chief recognised the pace at which non-financial reporting is moving and emphasized on the need for global convergence on reporting standard and assurance standard in ensuring high-quality trustworthy financial and non-financial reporting and corporate governance in the corporate sector. Pandey highlighted the five lines of defence of financial reporting and sound corporate governance - management, audit committee and independent directors, auditors, investors and regulators – and maintained that “all five lines of defence needs to be vigilant and work together to build trust”.
