NFRA detects shortcomings in MSKA’s audit of related party transactions

The National Financial Reporting Authority (NFRA) has flagged significant deficiencies in the audit practices of MSKA & Associates, an affiliate of BDO International, especially in related party transactions.

Releasing its inspection report on Thursday, the audit regulator also underscored the “absence of formal documentation regarding the firm’s governance and management structure”. This indicates “non-compliance” with the first element of Standard on Quality Control 1, or SQC-1, that deals with leadership responsibilities for quality within an audit firm.



NFRA initiated audit quality inspections of MSKA in January 2024 and the on-site inspection was carried out between January and February last year.

The audit procedures performed in respect of related party transactions and such disclosures across all the five selected companies audited by MSKA & Associates are “found to be inadequate”, NFRA said in the report. In respect of four of these selected companies, “related party disclosures were found incomplete, inaccurate, and non-compliant with relevant accounting standards (Ind AS 24) and the Companies Act, 2013 on one or more counts”, the regulator said.


“Key issues include failure to disclose transaction’s terms and conditions, incorrect interest rates, and misrepresentation of balances. In some cases, important transactions and personal guarantees were not disclosed, and audit procedures were inadequate,” NFRA said.

The regulator also identified the auditor’s errors in disclosures related to investments, loans, and director information. “These deficiencies reflect a lack of diligence, incomplete documentation, and non-compliance with statutory requirements, potentially leading to misleading financial statements,” NFRA said.