Audit quality means the auditor reached the right opinion on evidence that was enough and appropriate, and followed the standards while doing it. You cannot see it in the report, which looks the same either way, so it is judged by looking at the work behind it. In India, two bodies judge it in different ways: ICAI, through its quality standards and reviews, and NFRA, through inspections.
Last reviewed: 17 October 2026. Facts checked. We opened the ICAI announcement on the deferment of SQM 1 and SQM 2, which gives the dates below. We also searched for NFRA's inspection role and read search summaries, since nfra.gov.in did not load. We did not open the SQM 1 text, an NFRA guideline or any inspection report. The indicators listed later are our own practical suggestions, not NFRA's or ICAI's list.
What audit quality means
There is no single agreed definition. A practical one has three parts:
- The opinion is right. The financial statements are not materially misstated and the report says so.
- The work supports it. Evidence is enough, relevant and reliable, and the file shows it.
- The process is controlled. The firm has systems for people, ethics, acceptance, supervision and review.
The third part is where firm-level quality management comes in.
How India looks at it: ICAI and SQM 1
ICAI issued SQM 1 and SQM 2 on 14 October 2024. SQM 1 is the firm-level standard on quality management. It replaces SQC 1, which ICAI issued in 2007. SQM 2 covers engagement quality reviews.
Here is the current position, as per ICAI's announcement dated 31 March 2026:
| Item | Position |
|---|---|
| Original mandatory date | 1 April 2026 |
| Decision | ICAI's Council postponed it "until further announcement" at its meeting on 30-31 March 2026 |
| Meanwhile | SQC 1 continues to apply |
Search summaries add that 1 April 2025 was a recommended start date, and that the deferral followed a disagreement with NFRA about who has authority to notify such standards. We have not verified that background directly. Check ICAI's site for any later announcement before you rely on any date.
Even while the date is deferred, the logic is useful. SQM 1 is risk-based: a firm sets quality objectives, identifies and assesses quality risks, designs responses and monitors them. Our SQM 1 implementation checklist and gap assessment are built around that cycle, and SQM 1 vs SQC 1 explains what changes. For the global equivalent, see India SQM 1 vs global ISQM 1.
How India looks at it: NFRA inspections
Search summaries say NFRA carries out audit quality inspections under section 132 of the Companies Act, 2013. They say its guidelines describe inspections as reviews of compliance with auditing standards and the adequacy of quality control systems, that inspections are not investigations, and that NFRA may publish findings. Recent summaries describe findings on firm-wide controls and individual engagements, with themes including documentation and independence checks.
For the pattern in those findings, see our articles on NFRA enforcement themes, NFRA inspection findings and the 90-day remediation plan.
How firms can measure it
Regulators check quality after the event. A firm can track signals during the work. These are our suggestions:
| Signal | What it tells you |
|---|---|
| Partner and senior time on high-risk areas | Whether review is real |
| Timing of review sign-off against report date | Whether review was rushed |
| Working paper completion before the report date | Whether documentation follows the work |
| Share of risks linked to a specific response | Whether planning flows to testing |
| Review notes raised and cleared | Whether review finds things |
| Consultation on difficult matters | Whether judgement is challenged |
| Staff turnover and training hours | Whether the team can do the work |
| Findings from internal inspection | Whether the system finds its own faults |
| Client or engagement acceptance decisions | Whether the firm declines risky work |
Pick a few. Track them each engagement. Trends matter more than any single number.
A short firm checklist
- Do we have written quality objectives and named owners?
- Have we identified quality risks and linked each to a response?
- Do we monitor, including inspecting completed files?
- Do we fix deficiencies and check the fix worked?
- Do we apply engagement quality review where required? See our engagement quality review guide.
- Do we accept clients with a documented process? The engagement acceptance checklist can help.
Frequently Asked Questions
What is audit quality?
It is the auditor reaching the right opinion on sufficient appropriate evidence while following the standards, supported by a controlled firm system.
What is SQM 1?
ICAI's Standard on Quality Management 1, which sets a risk-based approach to a firm's quality management. Its mandatory date has been deferred, and SQC 1 continues to apply.
Who measures audit quality in India?
ICAI through its standards and reviews, and NFRA through inspections under the Companies Act, 2013.
Are there official audit quality indicators in India?
We did not find an official list in the sources we checked. The indicators above are our suggestions.
Does a clean opinion prove a high-quality audit?
No. Quality shows in the evidence on file and the process behind it.
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