NFRA quality review FY26: top 100 listed audit firms selected for review and the new ICAI coordination protocol

The National Financial Reporting Authority released its FY 2025-26 audit quality review list on May 27, 2026, covering 100 listed company audits across 47 audit firms. This is the largest quality review programme NFRA has run since its establishment under Section 132 of the Companies Act in 2018, and it represents a substantial scale-up from the FY25 programme which covered 65 audits. The expansion reflects NFRA's transition from a primarily investigation-driven body to one that conducts proactive, risk-based quality reviews as a routine supervisory function.

The selection criteria for the FY26 list are explicit and have been disclosed in the accompanying technical note. NFRA prioritised four categories: listed company audits where the audited entity had financial restatements in the last three years, audits that resulted in qualified or adverse opinions in FY 2024-25, audits of companies under SEBI investigation or with material accounting irregularity allegations during FY26, and a random sample of large-cap audits drawn to ensure broad sector coverage. The 100 selected audits span 12 NIC sectors, with the largest concentrations in banking and NBFC (18 audits), pharmaceuticals (12), infrastructure and real estate (11), and IT services (9).

The new ICAI coordination protocol, signed via Memorandum of Understanding on May 20, 2026, is the more significant administrative development. Under the protocol, ICAI-led disciplinary proceedings on audit quality matters that overlap with NFRA reviews will be coordinated to avoid duplication. NFRA review findings will be shared with ICAI within 30 days of closure, and ICAI will not initiate parallel proceedings on the same factual matters while the NFRA review is pending. The protocol does not affect NFRA's primary jurisdiction over listed company auditors under Section 132 but reduces the procedural friction that audit firms have historically faced when both regulators initiated parallel inquiries on the same audit.

The review timeline and documentation production requirements have not changed under the new protocol. The standard review window is 6 to 9 months from the date of notice. Audit firms must produce complete audit working papers (typically running to 5,000-15,000 pages for a large-cap audit), audit committee minutes and management representations, peer review documentation, Engagement Quality Control Review (EQCR) workpapers, and any consultation memos with technical experts. The production burden has driven most large audit firms to maintain a dedicated NFRA-review-ready archive for their listed company engagements, with the assumption that any listed audit may be selected for review in a 3-year window post-issuance.

For mid-tier and smaller audit firms that have picked up listed company audits in the post-Big-4-divestment period of 2023-2025, the FY26 review programme is a particular pressure point. Several of these firms are facing their first NFRA quality review and the documentation rigour expected is materially higher than typical ICAI peer review. The recommended practice for firms newly within the listed-company audit population is to engage a senior consultant to run a pre-review readiness assessment within 60 days of accepting any listed engagement.

The expected outcome distribution from past NFRA reviews suggests approximately 30 percent of reviewed audits result in formal observations requiring partner-level remediation undertaking, 12 percent result in monetary penalty under Section 132(4), and 3 percent result in debarment proceedings. The remaining 55 percent close without adverse findings but typically include recommended improvement areas.

KAMRIT's audit and assurance advisory desk provides NFRA review readiness diagnostics, working paper organisation, and partner-level coordination during the active review window.