A newly released inspection report by the National Financial Reporting Authority (NFRA) has revealed critical deficiencies in the audit processes of Deloitte Haskins & Sells LLP, one of India’s leading audit firms. The report, issued on March 28, 2025, outlines a number of compliance failures, ranging from inadequate documentation to insufficient risk assessment procedures, painting a troubling picture of Deloitte’s internal quality controls.
The inspection was part of NFRA’s routine oversight activities aimed at improving audit quality and ensuring adherence to regulatory standards. However, what the investigation found raised alarms. Deloitte, according to NFRA, failed to maintain proper documentation for its audit processes, compromising the transparency and reliability of its financial reviews. The regulator further observed that Deloitte did not adequately assess or identify material financial risks, leading to potential inaccuracies in corporate reporting.
In addition, NFRA flagged Deloitte for deviating from mandatory auditing standards. The audit firm was also criticized for its weak approach to verifying related party transactions—financial dealings between entities with pre-existing relationships—which should be carefully reviewed to avoid conflict of interest or fraud. Perhaps most notably, the review highlighted concerns over the competence and scepticism of Deloitte’s auditors, specifically in their evaluation of external experts used during the audit process.
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In response to these findings, Deloitte has reportedly taken remedial action. According to the NFRA report, the firm introduced procedural reforms aimed at strengthening its risk management framework and audit controls. Among these steps are the adoption of a revised internal networking agreement, better documentation practices through engagement quality control review (EQCR), and a voluntary move to limit non-audit services that could lead to conflicts of interest.
NFRA has made it clear that it expects full compliance from Deloitte with Section 144 of the Companies Act, 2013, which governs the independence and responsibilities of auditors in India. The authority noted that the weaknesses exposed in the report could invite greater regulatory scrutiny and may necessitate further corrective measures from the firm.
Financial experts say such inspections are crucial for safeguarding investor confidence and ensuring the integrity of financial markets. Given Deloitte’s stature and influence within India’s corporate landscape, the report underscores the importance of rigorous auditing standards and accountability for firms entrusted with vetting the financial health of major companies.