NFRA Approves 40 Audit Standards in Line with Global Norms
The NFRA formed under the Companies Act, 2013, has lately endorsed 40 audits standards harmonized with its international mechanism. This step reasserts India’s commitment to the production of quality financial reports and audits from across the country.
What is the Purpose of the NFRA?
The NFRA was formulated with an objective to provide high standards of financial reporting and Auditing. It achieves this by:
- Advising on accounting and auditing policies and standards.
- Supervising and “policed compliance” with these standards.
- Supervising services offered by auditors and accountants so as to maintain high quality results.
- Suggesting recommendations to work for increasing the quality of services.
- Protecting the public by putting measures that check on the operations of a company to enhance on transparency and accountability.
Formed in 2018 under section 132 (1) of the Companies Act, 2013 NFRA was set up after analyze the role of auditor and ICAI in corporate frauds like Punjab National Bank Scam.
Who is More Powerful, NFRA or ICAI?
The NFRA has more authority to directly regulate than the Institute of Chartered Accountants of India (ICAI). While ICAI focuses on maintaining professional competence and supporting its members’ development, NFRA has:
- Power to fine practitioners concerning professional misconduct.
- The right to debar auditors and audit firms from practice.
- Exclusive territorial authority over those firms that are listed on the stock exchange, the big unlisted public joint stock companies and other defined categories of corporations.
Whereas, ICAI is involved in different activities professionally whereas NFRA is involved in regulatory power and authority and more powerful in enforcement.
Who is Eligible for NFRA?
The NFRA’s jurisdiction applies to entities with significant public interest. These include:
- Listed Companies: Companies whose securities are listed on any stock exchange in India or abroad.
- Unlisted Public Companies: Those meeting any of the following thresholds:
- Paid-up capital of ₹500 crores or more.
- Annual turnover of ₹1,000 crores or more.
- Outstanding loans, debentures, and deposits of ₹500 crores or more.
- Special Entities: Insurance companies, banking institutions, companies involved in electricity generation or supply, and other entities governed by specific laws.
- Government-Directed Cases: Any company or body corporate referred to NFRA by the Central Government in public interest.
Key Features of NFRA’s Role
- Penal Powers: NFRA can carry out penalties for misconduct that range anywhere from ₹1lakhs to five times the amount of fees received for an individual and ₹10 lakhs to ten times the amount of fees for firms.
- Scope of Investigation: NFRA can investigation Public Interest Entities (PIEs), which is consists of:
- Includes companies, whose securities have listing in India or internationally.
- Unlisted public companies meeting any of the following thresholds:
- Paid up capital of rupees five hundred crores or more.
- Turnover not less than ₹ 1000 crores per annum.
- Gross up loans outstanding, debentures and deposits of ₹ 500 crores and above.
- Insurance companies, banking institutions, and companies involved in electricity generation or supply.
- Accountability: The transparency of NFRA Is supervised by the Comptroller and Auditor General of India (CAG).
Organizational Structure
The NFRA comprises:
- An experienced Chairperson of high repute either in accountancy, auditing, finance or law or other business discipline.
- Up to 15 other members, out of that all are nominated by the Central Government.
Headquarters
NFRA operates from its office in New Delhi, India.