Inspection Report: M/s Deloitte Haskins & Sells LLP · 132.2-2023-07
NFRA inspection report 132.2-2023-07 · 28 Mar 2025
Official title
M/s Deloitte Haskins & Sells LLP – Inspection Report No.132.2-2023-07
NFRA inspection report 132.2-2023-07 · 28 Mar 2025
Official title
M/s Deloitte Haskins & Sells LLP – Inspection Report No.132.2-2023-07
Summary
Check the official recordThe National Financial Reporting Authority (NFRA) conducted an audit quality inspection of M/s Deloitte Haskins & Sells LLP for the 2023 cycle. The inspection reviewed the firm's remedial actions regarding previous observations and performed a thematic review of three audit engagements for the financial years ending 31 March 2022 and 31 March 2023. The review focused on internal financial control over revenue, related party transactions, and impairment of non-financial assets. NFRA noted improvements in the firm's governance, independence declarations, and documentation of engagement quality control reviews. However, the inspection identified deficiencies in the performance of audit procedures for related party transactions and the evaluation of auditor experts under SA 620. The firm must address these findings to improve audit quality.
What you must do
Key dates
Who is affected
[Image omitted. See the official document.]
राष्ट्रीय वित्तीय रिपोर्टिंग प्राधिकरण National Financial Reporting Authority
Audit Firm: M/s Deloitte Haskins & Sells LLP Firm Registration No. 117366W/W100018 Inspection Report No.132.2-2023-07 March 28, 2025
NFRA, 7th Floor, HT House, 18-20, K. G. Marg, New Delhi 110001
Executive Summary .......................................................................................................................3
Inspection Overview .......................................................................................................................3
Audit Quality Inspection Approach ..............................................................................................4
Inspection Methodology .................................................................................................................5
Audit Firm’s Profile.........................................................................................................................5
Acknowledgement...........................................................................................................................5
Review of Firm-Wide Audit Quality Control System – Compliance with Previous Year’s Inspection Observations...................................................................................................................5
Review of Individual Audit Engagement Files Focusing on Selected Areas of Audit..................7
Chronology of events .......................................................................................................................9
M/s Deloitte Haskins & Sells LLP - Inspection Report No. 132.2-2023-07, March 28, 2025 | Page | 2
Section 132 of the Companies Act, 2013 (the Act) mandates the National Financial Reporting Authority (NFRA), inter alia, to monitor compliance with Auditing Standards, to oversee the quality of service of the professions associated with ensuring compliance with such standards, and to suggest measures required for improvement in quality of their services. Under this mandate, NFRA initiated audit quality inspections of the Chartered Accountant firm M/s Deloitte Haskins & Sells LLP in March 2024. The scope included a review of the remedial actions taken by the Firm for the observations reported in the last report, and a thematic review of three selected audit engagements of financial statements for the years ending 31.03.2022 and 31.03.2023, focusing on three significant audit areas, viz., Internal Financial Control over Financial Reporting on Revenue, Related Party Transactions and Impairment of Non-Financial Assets, due to their inherent higher risk of material misstatement. The Inspection included an on-site visit in September 2024, discussions with the Audit Firm personnel including the engagement teams of select audit engagements, review of policies and procedures and examination of documents. The observations were conveyed to the Audit Firm and replies were received. A Draft Inspection Report was also issued to the Firm, for which a written response was received. The key observations in this report are summarised as follows:
a. The Audit Firm has adopted a revised networking agreement wherein the Audit Executive Committee has the ultimate responsibility for Quality Control and Risk Management. The Audit Firm has also improvised the procedure to ensure personnel independence. Rather than preparing separate EQCR docket, now the Audit Firm has also started to include EQCR work in the audit file itself. The internal consultation memo of the Audit Firm also includes the basis / rationale of the final conclusions unlike observed by NFRA in its last inspection. NFRA recognizes that the Audit Firm’s voluntarily adopted Non-Audit Service (NAS) guidelines regarding not providing prohibited NAS is a first step, but NFRA expects full compliance to Section 144 of the Companies Act, 2013. Part B of this Report summarises these changes and other remedial measures taken by the Firm.
b. In the engagement files selected for review in the current inspection cycle, observations regarding not performing sufficient appropriate audit procedures for the verification of related party transactions being on arm’s length basis and also regarding inadequate evaluation of competence, capability, objectivity and work of the auditor’s expert as per the requirements of SA 620 have been observed. This is detailed in Part C of this report.
M/s Deloitte Haskins & Sells LLP - Inspection Report No. 132.2-2023-07, March 28, 2025 | Page | 3
requirements, and the sufficiency and effectiveness of the quality control systems of the Audit Firm/Auditor, including:
This year’s inspections involve a review of the remedial action taken by the Firm in response to the previous inspection observations and a test check of audit engagements performed by the Audit Firm during the Financial Years 2022 and 2023.
Inspections are intended to identify areas and opportunities for improvement in the Audit Firm’s system of quality control. Inspections are, however, not designed to review all aspects and identify all weaknesses in the governance framework or system of internal control or audit risk assessment framework; nor are they designed to provide absolute assurance about the Audit Firm’s quality of audit work. In respect of selected audit assignments, inspections are not designed to identify all the weaknesses in the audit work performed by the auditors in the audit of the financial statements of the selected companies. Inspection reports are also not intended to be either a rating model or a marketing tool for Audit Firms.
Selection of Audit Firms for the 2024 inspections was based upon the extent of public interest involved, as evidenced by the size, composition and nature of the audit firm, the number of audit engagements completed in the year under review; complexity and diversity of preparer’s financial statements (henceforth, Companies) audited by the firm and other risk indicators. M/s Deloitte Haskins & Sells LLP, an Indian firm which is part of Deloitte Touche Tohmatsu Limited (DTTL) network, was one of the audit firms selected as per the above parameters.
The selection of individual audit engagements of the Audit Firm, Deloitte Haskins & Sells LLP, was largely risk-based, based on financial and non-financial risk indicators identified by NFRA. Accordingly, the Audit Files in respect of three (3) Audit Engagements relating to the statutory audit of Financial Statements for the years ending 31.03.2022 and 31.03.2023 were reviewed during the inspection.
The scope of the inspection was as follows:
a. Review of the remedial measures and improvements made in response to the previous inspection observations for firm-wide quality controls to evaluate the Audit Firm’s adherence to SQC 1, Code of Ethics and the applicable laws and rules.
b. Review of individual Audit Engagement Files- A sample of three (3) individual audit engagement files pertaining to the annual statutory audit of financial statements for the years ending 31.03.2022 and 31.03.2023 was selected. Three significant audit areas were identified in respect of each audit engagement viz., internal financial control over financial reporting pertaining to revenue, related party transactions and impairment of non-financial assets, due to their inherent higher risk of material misstatement.
M/s Deloitte Haskins & Sells LLP - Inspection Report No. 132.2-2023-07, March 28, 2025 | Page | 4
The selected sample of three individual audit engagements is not representative of the Firm’s total population of the audit engagements completed by the Firm for the year under review.