Module: | Specialized Audits, Tech & ESG Disclosures
Q98: Consider the following statements regarding the NFRA Circular issued in January 2026 on communication between Statutory Auditors and Those Charged With Governance (TCWG):
1. The circular mandates that statutory auditors must establish a structured, two-way communication process with the TCWG, rather than relying on one-way, last-minute presentations.
2. An auditor is permitted to interpret the silence or lack of response from an Audit Committee during a presentation as formal consent to the proposed audit strategy.
3. Auditors are strictly required to document all oral discussions held with the TCWG, as NFRA considers undocumented, bullet-point presentations inadequate for proving compliance.
Which of the above statements is/are incorrect?
2. An auditor is permitted to interpret the silence or lack of response from an Audit Committee during a presentation as formal consent to the proposed audit strategy.
3. Auditors are strictly required to document all oral discussions held with the TCWG, as NFRA considers undocumented, bullet-point presentations inadequate for proving compliance.
Which of the above statements is/are incorrect?
✅ Correct Answer: B
🎯 Quick Answer:
B. Only 2 is incorrect.The NFRA circular acts as a strict enforcement guide on how this standard must be practically applied.
Structural Breakdown: Statement 1 is correct; the regulator demands continuous engagement throughout the audit cycle.
Statement 2 is incorrect; the circular explicitly warns auditors that silence from the audit committee cannot be treated as consent or agreement to audit findings.
Statement 3 is correct; heavy documentation of oral deliberations is now a non-negotiable regulatory expectation.
Historical/Related Context: During disciplinary investigations into major corporate frauds, NFRA found that auditors often presented crucial red flags to the board orally, but because nothing was documented, the board later claimed ignorance, shielding themselves while the auditor took the blame.
Causal Reasoning: Forcing auditors to document exact responses (or the lack thereof) from the board ensures a definitive paper trail exists, proving whether the board actively suppressed the auditor's warnings or genuinely collaborated to fix internal controls.