UPSC Exam Preparation: Topic of the Day – National Financial Reporting Authority (NFRA)
The National Financial Reporting Authority (NFRA), as per the Companies Act, 2013 is tasked with the job of recommending accounting and auditing standards, ensuring compliance with them and overseeing the quality of service of the accounting and audit professions.
- It has also been given the power to investigate matters of professional misconduct by chartered accountants or CA firms, impose penalty and debar the CA or firm for up to 10 years.
- It is stated in the Act that “no other institute or body shall initiate or continue any proceedings in such matters of misconduct where the National Financial Reporting Authority has initiated an investigation.”
- It is expected that the decision would result in improved domestic and foreign investments, improved economic growth, assistance in development of the audit profession and supporting the globalisation of business through compliance with international practices.
The NFRA is composed of one post of Chairperson, three posts of full-time Members and one post of Secretary for NFRA. Chairperson shall be a person of eminence and having expertise in accountancy, auditing, finance or law to be appointed by the Central Government
- The jurisdiction of NFRA for investigation of CAs and their firms under section 132 of the Act would extend to large public companies that are not listed (threshold prescribed in the rules) and listed companies. It is at the discretion of the Central Government to refer such other entities for investigation, involving public interest.
- The inherent regulatory role of Institute of Chartered Accountants of India (ICAI) as provided for in the Chartered Accountants Act, 1949 shall continue in respect of its members in general and specifically with respect to audits pertaining to private limited companies, and public unlisted companies below the threshold limit to be notified in the rules.
- Institute of Chartered Accountants of India would continue playing the advisory role with respect to accounting and auditing standards, policies through the recommendations to NFRA.
- Quality audit with respect to public companies that are not listed and are below the prescribed threshold, private companies that are listed and those companies delegated by the NFRA would be continued to be done by Quality Review Board (QRB).
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