Inspection Report: M/s SRBC & Co. LLP (2024) · 132.2-2024-02

[Image omitted. See the official document.]

राष्ट्रीय वित्तीय रिपोर्टिंग प्राधिकरण

National Financial Reporting Authority

INSPECTION REPORT 2024

Audit Firm: M/s S R B C & Co. LLP Audit Firm Network: M/s S.R. Batliboi & Affiliates Firm Registration No. 324982E/E300003 Inspection Report No.132.2-2024-02 March 16, 2026

NFRA, 7th Floor, HT House, 18-20, K. G. Marg, New Delhi

---

Contents

Executive Summary..............................................................................................................................3 Inspection Overview .............................................................................................................................4 Audit Quality Inspection Approach ....................................................................................................5 Inspection Methodology .......................................................................................................................5 Audit Firm’s Profile..............................................................................................................................6 Acknowledgment...................................................................................................................................6 Review of Firm-Wide Audit Quality Control System ……………………………………………...6 Review of Individual Audit Engagement Files focusing on selected Areas of Audit (Property Plant & Equipment and Shares & Investment) .............................................................................. 8 Chronology of Events .........................................................................................................................12 Appendix A - The Firm’s response to this inspection report..........................................................12

---

PART A

Executive Summary

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 SRBC & Co LLP in March 2025 (the Audit Firm/the Firm) including network firms of M/s S.R. Batliboi & Affiliates. The scope of the inspection included a review of the remedial actions taken by the Firm for the deficiencies reported in the previous inspection report, a focus on human resources, consultation, and monitoring in respect of SQC 1 and a review of five selected individual audit engagements of financial statements for the years ending 31.03.2024, focusing on two significant audit areas, viz., Revenue Recognition and Loans & Advances (Assets). The third focus area was engagement specific. The Inspection included an on-site visit in December 2025. The Firm also submitted an Action Taken Report on the observations of the previous inspection report dated 27.03.2025.

During the inspection, the inspection team held discussions with the Audit Firm personnel, reviewed policies and procedures and examined related documents to arrive at prima facie observations. These observations were discussed with the Firm/Audit teams. Based on discussion, written observations were conveyed to the Audit Firm. After examining the replies, NFRA conveyed a draft inspection report. The Firm provided a response to such report and this inspection report is issued. The key observations are summarized as follows.

Firm-Wide Audit Quality Control System

• a) The eligibility letters issued by the Firm for appointment as auditor needs to be fully compliant with section 141(3) of the Act, as declaration given by the engagement partner needs to use the term ‘relative’ as provided in this section (the Firm uses the term ‘immediate family member’). The Firm assured to the take remedial action. (ref. Paragraphs 12 to 16 of this report)
• b) The Firm has policy and procedures to ensure firmwide independence. The Firm has also made a policy that EY Network Firms will not provide non-audit services (subject to some exceptions) to NFRA regulated audit clients. To ensure compliance with the Firm’s policies, the Firm uses various tools with interconnected interfaces. However, there is a need to have an appropriate monitoring mechanism to ensure that the Firm’s policies and procedures on firmwide independence are operating effectively and compiled with in practice. (ref. Paragraphs 17 to 19 of this report)

---

Individual Audit Engagements

• c) In respect of Property Plant & Equipment (in two of the three selected audit engagements), one or more audit procedures were not appropriately performed in respect of annual review of asset retirement obligation, disclosure of useful life of the asset, physical verification of bearer plants and documentation of test of control for addition of PPE. (ref. Paragraphs 21 to 29 of this report)
• d) In respect of Shares & Investments (in the selected audit engagement), appropriate audit procedure was not performed to evaluate Arm’s Length Price of related party transaction. (ref. Paragraph 30 of this report).

Inspection Overview

1. Section 132 of the Act, inter alia, mandates the NFRA, to monitor compliance with Auditing and Accounting 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 the quality of their services. The relevant provisions of NFRA Rules prescribe the procedures in this regard, which include evaluation of the sufficiency of the quality control system of Auditors and the manner of documentation of their work. Under this mandate, NFRA initiated audit quality inspections in March 2025. The overall objective of audit quality inspections is to evaluate the compliance of the Audit Firm with auditing standards and other regulatory and professional requirements, and the sufficiency and effectiveness of the quality control systems of the Audit Firm, including:

• (a) adequacy of the governance framework and its functioning.
• (b) effectiveness of the firm’s internal control over audit quality; and
• (c) system of assessment and identification of audit risks and mitigating measures

2. This year's inspections involved a review of the remedial action taken by the Firm in response to the previous inspection observations, review of certain focus areas, test check of quality control process and a test check of audit engagements performed by the Audit Firm during the year.

3. 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 engagements, 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.

---

Audit Quality Inspection Approach

4. Selection of Audit Firms for the 2024 inspections was based upon the 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 audited by the Firm and other risk indicators. M/s S.R. Batliboi Affiliates was one of the Audit Firm networks selected as per the above parameters. M/s SR Batliboi & Affiliates is a registered network with the Institute of Chartered Accountants of India. This is a network of five audit firms. These firms are also members of the EY Global Network. For this year's inspection, the entire SRB Affiliates network was treated as a single entity, and any reference to Audit Firm in this report includes all member firms of SRB & Affiliates that fall under Rule 3 of the NFRA Rules 2018.

5. Selection of individual audit engagements of the Audit Firm was largely risk-based, based on financial and non-financial risk indicators identified by NFRA. Accordingly, the audit files of five audit engagements relating to statutory audit of financial statements for the years ending 31.03.2024 were reviewed during the inspection.

6. The scope of the inspection was as follows:

• a) Review of the remedial measures and improvements made in response to the previous inspection observations; and focus on Consultation, Monitoring and Human Resource 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 five individual audit engagement files pertaining to the annual statutory audit of financial statements for the years ending 31.03.2024 was selected from different sectors like Power, Tea, Hotel, Pharma and Industrial Goods. Two significant audit areas were identified in respect of each audit engagement viz., Revenue Recognition and Loans & Advances (Assets) considering their inherently higher risk of material misstatements. In addition, a third focus area was selected which was specific to the engagement (Shares & Investment; Property Plant & Equipment; and Inventory).