National Financial Reporting Authority

In News

• The National Financial Reporting Authority (NFRA) to get more powers to act against auditors and company executives.

About

• Constitution:
  • The NFRA was constituted as a statutory body in 2018 by the Government of India under Sub Section (1) of section 132 of the Companies Act, 2013.
• Functions and Duties: 
  • Recommend accounting and auditing policies and standards to be adopted by companies for approval by the Central Government;
  • Monitor and enforce compliance with accounting standards and auditing standards;
  • Oversee the quality of service of the professions associated with ensuring compliance with such standards and suggest measures for improvement in the quality of service;
  • Perform such other functions and duties as may be necessary or incidental to the aforesaid functions and duties.
  • Protect the public interest and the interests of investors, creditors and others associated
• Jurisdiction of NFRA:
  • The jurisdiction of NFRA for investigation of Chartered Accountants and their firms would extend to listed companies and large unlisted public companies
  • The NFRA is tasked to investigate audit of Listed Companies and Unlisted companies with net worth not less than Rs 500 crore or paid-up capital of not less than Rs 500 crore or annual turnover not less than Rs 1,000 crore as on March 31 of immediately preceding financial year, and companies having securities listed outside India. 
  • The Centre further has the power to refer the entities for investigation where public interest would be involved. The rest are regulated by ICAI.
  • The inherent regulatory role of 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 .
• Significance: 
  • India is now eligible to become a member of the International Forum of Independent Audit Regulators (IFIAR), due to an independent audit oversight body in the country.
  • It will attract foreign/domestic investments and enhance economic growth.

Source: LM