Why Clear Communication Between Auditors and Boards Really Matters

In January 2026, the National Financial Reporting Authority (NFRA) issued an important circular highlighting a common but serious issue in corporate audits—poor communication between statutory auditors and those responsible for governance, such as the Board of Directors and Audit Committees.

This guidance is not about paperwork or technical compliance alone. It is about building trust, improving audit quality, and strengthening corporate governance.

Who Are “Those Charged with Governance” (TCWG)?

In simple terms, TCWG are the people who oversee how a company is run and how its financial reporting is controlled. This usually includes the Board of Directors and, in many cases, the Audit Committee.

NFRA observed that auditors sometimes communicate only with management or treat presentations to the Audit Committee as sufficient. This approach is incorrect. Auditors must clearly identify who TCWG are at the beginning of the audit and ensure meaningful communication with them.

Communication Is a Continuous Process

Audit communication should not happen only at the end of the year. NFRA emphasizes that it must be regular, two-way, and timely.

Auditors are expected to discuss:

• Audit plan and timelines

• Key risk areas and material issues

• Major accounting judgments and estimates

• Internal control weaknesses

• Unusual or high-risk transactions

• Auditor independence

At the same time, Boards and Audit Committees should share:

• Strategic decisions affecting the business

• Concerns about fraud or compliance

• Regulatory matters

• Views on internal controls and risk management

Importance of Written and Clear Communication

NFRA clearly states that important matters must be documented properly. Informal discussions, last-minute presentations, or emails without clear responses are not acceptable. Written communication helps ensure clarity, accountability, and proper follow-up.

Internal Controls Cannot Be Ignored

One major concern highlighted by NFRA is the failure to communicate weaknesses in internal controls. If auditors identify serious control gaps, they must report them clearly and in writing. Ignoring or downplaying such issues can harm the company and its stakeholders.

Why This Matters

Good communication improves decision-making, reduces surprises, and strengthens confidence in financial reporting. NFRA has made it clear that weak auditor-governance communication is not a minor lapse—it directly affects audit quality and investor trust.

The message from NFRA is simple:
Effective communication is a shared responsibility. Auditors, Boards, Audit Committees, and management must work together openly and transparently. When communication is clear and timely, audits become more meaningful, governance becomes stronger, and risks are better managed.