National Financial Reporting Authority (NFRA) for Chartered Accountants expected to rollout in Two Months
The National Financial Reporting Authority (NFRA), a new proposed regulatory for erring Chartered Accountants and CA Firms to be implemented in two months, reports said. As per a report in Moneycontrol, the proposed auditors’ watchdog, National Financial Reporting Authority (NFRA), will soon become a reality and is expected to be set up in the next two months, a senior government official said.
The Cabinet approved the proposal of setting up of NFRA as an independent regulator for the chartered accountants, for enforcing their accounting and auditing standards, therefore, enhancing investor and public confidence in financial disclosures of companies.
This was also one of the key recommendations that was brought about by the Companies Act, 2013. However, the provision was not implemented by the Government. Under the provisions of the Companies Act, 1956, the Centre was to prescribe accounting standards prepared by ICAI in consultation with the National Advisory Committee on Accounting Standards (NACAS). Such powers are to be transferred to NFRA under the 2013 Act. Consequently, NFRA would have taken away several powers that are currently vested with ICAI. There were rumors that several chartered accountants had successfully lobbied with the government to block the notification.
“The government has already notified the rules related to NFRA. We have also sought applications for the post of chairman and three full-time members. The body would soon be coming up,” the official said. NFRA can investigate either suo motu or if there is a reference made to it by the government, according to the rules released by ministry of corporate affairs. In addition, the authority will also have the power to penalise any member or firm of chartered accountants. A fine up to Rs one lakh can be imposed on individuals, and it can be extended to five times of the fees received. For firms, the penalty amount will be Rs 10 lakhs, which can be extended to ten times of the fees received. According to the rules, the authority can also debar the firm engaging in practice as member of the Institute of Chartered Accountant of India (ICAI). The inherent regulatory role of ICAI will continue, especially with respect to audits pertaining to private and public unlisted companies’ rules. It will continue with its advisory role on accounting and auditing standards by making its recommendations to NFRA.