The National Financial Reporting Authority (NFRA) has recently made headlines with the formation of a Technical Advisory Committee (TAC). This committee was formed to aid and guide the executive body of NFRA on matters related to drafts of accounting standards and auditing standards. The TAC committee is comprised of seven members and is chaired by R. Narayanaswamy.
The Constitution of NFRA
Established in 2018 by the Government of India under section 132 (1) of the Companies Act, 2013, the NFRA serves as an audit regulator. The creation of NFRA came in response to the need for a more robust auditing system after auditors and the Institute of Chartered Accountants of India were scrutinized for alleged lapses in various corporate scams, which included the Punjab National Bank scandal.
Composition of NFRA
The NFRA is composed of a chairperson, who is a person renowned and proficient in accountancy, auditing, finance, or law, and appointed by the Central Government. The number of other members in the NFRA does not exceed 15.
Duties and Functions of NFRA
A primary role of the NFRA is to suggest accounting and auditing policies and standards that companies should adopt, pending approval from the Central Government. Additionally, the NFRA is responsible for monitoring and enforcing compliance with these accounting standards and auditing standards. It oversees the quality of service of professions associated with ensuring compliance with such standards and suggests measures for enhancing the quality of their service. A central goal of NFRA is to protect public interest.
Powers Exercised by NFRA
The NFRA is empowered to undertake investigations related to a certain class of companies and corporate bodies. These include companies whose securities are listed on any stock exchange in India or beyond, unlisted public companies with paid-up capital of not less than Rs. 500 crores, or having annual turnover of not less than Rs. 1,000 crores, or having, in aggregate, outstanding loans, debentures and deposits of not less than Rs. 500 crores as on the 31st March of the immediately preceding financial year. It also includes insurance companies, banking companies, and companies engaged in the generation or supply of electricity.
In instances where professional or other misconduct is proved, NFRA has the authority to impose penalties. For individuals, penalties start from one lakh rupees and can extend to five times the received fees. For firms, the penalty begins at ten lakh rupees and can stretch up to ten times the received fees.
Financial Oversight and Headquarters
The Comptroller and Auditor-General of India oversees the accounts of NFRA to ensure transparency and accountability. The headquarters of NFRA are situated in New Delhi, the capital of India.