NFRA guidance note on Audit Committee interaction with Auditor and Audit Strategy & Planning
The National Financial Reporting Authority (NFRA) has released the second instalment of its Auditor-Audit Committee Interaction Series, outlining key strategies for auditors and urging both auditors and audit committees to adopt a transparent, proactive, and strategic approach to auditing. The guidance emphasizes the importance of effective audit strategies and plans, focusing on transparent communication, risk assessment, and active audit committee involvement. It highlights the need for continuous, clear, and detailed communication between auditors and audit committees. This ongoing dialogue ensures that audit committees remain informed about the audit’s progress, emerging risks, and significant developments.
A key focus of NFRA’s guidance is risk assessment, essential for shaping the audit strategy. Auditors are expected to evaluate the overall risk of material misstatement at the financial statement level and risks related to specific assertions, such as account balances, transactions, and disclosures. Following the development of the audit strategy, NFRA stresses the need for detailed audit planning. This includes identifying significant risk areas, conducting analytical procedures, and making key decisions regarding the use of specialized resources. Auditors may need to engage experts such as forensic accountants, valuation professionals, or information technology (IT) specialists for specific audit areas.
The NFRA also advocates the use of advanced technology to enhance the audit process. Auditors are encouraged to leverage tools like computer-assisted audit techniques (CAATs) and data analytics.
Moreover, it highlights the importance of evaluating the competence and independence of component auditors, especially in group audits.
To strengthen audit quality and promote greater transparency, NFRA has called for enhanced oversight by audit committees during the audit strategy and planning phases. The authority’s latest publication highlights critical questions that audit committees should ask auditors to ensure robust audit processes.
