M/s Walker Chandiok & Co LLP – Inspection Report No.132.2-2023-06 · 28 Mar 2025

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राष्ट्रीय वित्तीय रिपोर्टिंग प्राधिकरण

National Financial Reporting Authority

INSPECTION REPORT

2023

Audit Firm: M/s Walker Chandiok & Co LLP Firm Registration No.001076N/N500013 Inspection Report No.132.2-2023-06 March 28, 2025

NFRA, 7th Floor, HT House, 18-20, K. G. Marg, New Delhi 110001

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Contents

PART -A ............................................................................................................................................1

Executive Summary..............................................................................................................................1

Inspection Overview .............................................................................................................................1

Audit Quality Inspection Approach ....................................................................................................2

Inspection Methodology .......................................................................................................................2

Audit Firm’s Profile..............................................................................................................................3

Acknowledgment...................................................................................................................................3

PART- B.............................................................................................................................................4

Review of Firm-Wide Audit Quality Control System – Compliance with Previous Year’s Observations..........................................................................................................................................4

• A. Independence Requirements: .................................................................................................4
• Sharing of Client details between WCCL & GTIL’s Network & Provision of Non-Audit services by the WCCL & its Network entities...........................................................................6
• Engagement Team’s Independence ...........................................................................................8
• B. Audit Documentation...............................................................................................................9
• C. Client Acceptance & Continuance Policies............................................................................9
• D. Engagement Quality Control Review...................................................................................10

PART -C ..........................................................................................................................................10

Review of Individual Audit Engagement Files Focusing on Selected Areas of Audit...................10

• A. Related Party Transactions ......................................................................................................11
• B. Impairment of Non-Financial Assets.......................................................................................12
• C. ICFR-Revenue .........................................................................................................................12

PART- D ..........................................................................................................................................13

Chronology of Events .........................................................................................................................13

Annexures............................................................................................................................................14

Firm’s Response ..................................................................................................................................15

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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 conducted an audit quality inspection of Walker Chandiok & Co. LLP (WCCL hereinafter) in August 2024. The scope included a review of the remedial actions taken by the Firm for the deficiencies reported in the previous inspection report, and a review of three selected audit engagements of financial statements for the year ending 31.03.2023, focusing on three significant audit areas, viz., Related Party Transactions, Impairment of Non-Financial Assets and ICFR-Revenue due to their inherent higher risk of material misstatement. The inspection included an on-site visit in October 2024, discussions with the Audit Firm personnel including the engagement teams of the selected audit engagements, review of policies and procedures, and examination of documents. The key observations in this report are summarized as follows:

• a. The Audit Firm has not remediated the issue related to the auditor’s independence, audit documentation, and EQCR, as noted in the previous inspection report. These issues are discussed in Part B of this report.
• b. In three (3) engagement files selected for review in the current inspection cycle, deficiencies were noted in the verification of Related Party Transactions, Impairment of Non-Financial Assets, and ICFR-Revenue. These are discussed in detail in Part C of this report.

Inspection Overview

1. The overall objective of audit quality inspections is to evaluate compliance of the audit firm/auditor with auditing standards and other regulatory and professional requirements, and the sufficiency and effectiveness of the quality control systems of the audit firm/auditor, 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. Inspections are intended to identify areas and opportunities for improvement in the audit firm’s system of quality control. Inspections, by nature, are distinct from investigations undertaken under section 132 (4) of the Act. However, in certain cases, test-check by the inspection teams may provide basis for or require reference of such cases/matters for enforcement or investigation under applicable provisions of the Act and Rules.

3. 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 relating to the statutory audit of financial statements for the year ending 31.03.2023.

4. 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 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.

Audit Quality Inspection Approach

5. Selection of audit firms for the 2023 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 the company’s financial statements audited by the firm and other risk indicators. M/s Walker Chandiok & Co. LLP (WCCL) was one of the audit firms selected as per the above parameters.

6. The selection of individual audit engagements of the Walker Chandiok & Co. 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 year ending 31.03.2023 were reviewed during the inspection.

7. 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 year ending 31.03.2023 was selected. Three significant audit areas were identified in respect of each audit engagement viz., Related Party Transactions, Impairment of Non-Financial Assets, and ICFR -Revenue, due to their inherent higher risk of material misstatement.

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.

Inspection Methodology

8. An entry meeting for the current year’s inspection was held with M/s Walker Chandiok & Co. LLP on 30.04.2024 at the NFRA office. Discussions were held with the engagement teams of the three audit engagements selected for review. The on-site inspection was carried out between 08.10.2024 to 10.10.2024.

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Audit Firm’s Profile

9. M/s Walker Chandiok & Co. LLP (WCCL), a Limited Liability Partnership, is registered with The Institute of Chartered Accountants of India. WCCL stated that it was a part of a network^1 of two audit firms, which operate through a registered office and several branch offices at different locations across India. The Firm was a statutory auditor of 293 entities falling under NFRA’s purview (Annexure-1).

10. As reported in the Inspection Report 2022 (IR 2022 hereinafter), WCCL is also a part of an international network called Grant Thornton International Limited (GTIL hereinafter). In its communication to NFRA, however, WCCL has maintained that it is not a member of the GTIL network.

Acknowledgment

11. NFRA acknowledges the cooperation of the Audit Firm during the inspection.