What is the issue ?
- The Centre has approved the proposal to set up the National Financial Reporting Authority (NFRA), intended to serve as an independent regulator for the auditing profession.
About the move :
- Section 132 of the Companies Act, 2013 gives the Centre the power to set up such an authority.
- A Parliamentary Standing Committee had also recommended that the National Advisory Committee on Accounting Standards proposed in the Companies Bill, 2009 be institutionalised.
About Section 132 :
It says the NFRA can do, among other things, the following:
- Recommend to the Centre formulation of accounting and auditing standards and polices to be adopted by companies and auditors;
- Monitor and enforce such standards and policies; and oversee quality of services of the professions associated with the compliance of these standards and policies.
What are NFRA’s powers?
- It can investigate into professional matters or misconduct of any member or a rm of chartered accountants;
- It can issue summons and examine on oath;
- It can also inspect any book, registers and documents of any professional/rms probed;
- It may impose penalties and even powers to debar a member of a firm.
Composition of NFRA :
- It will comprise a chairperson, three fulltime members and a secretary.
Role of Institute of Chartered Accountants of India :
- ICAI’s role will continue in respect of its members, in general, and, specically, with respect to audits pertaining to private limited companies and public unlisted companies below the threshold limit to be notied in the rules.
- ICAI will continue with its advisory role on accounting and auditing standards and policies by making its recommendations to NFRA.