CA Tushar Makkar
Quick Summary
NFRA has been constituted as a quasi-judicial body with a larger remit than NACAS (National Advisory Committee on Accounting Standards). NFRA Rules 2022 spans its applicability to companies whose securities have been listed in or outside India, unlisted public companies having Paid-up share capital
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FAQ :
The NFRA is a quasi-judicial body overseeing auditing functions. Its rules apply to listed companies (in or outside India), unlisted public companies with significant paid-up capital or turnover, and specific sectors like insurance and banking.
NFRA's initiatives include fostering better communication between auditors and audit committees, releasing guidance papers for stakeholders, and emphasising that audit committees cannot solely blame auditors for inaccuracies in financial statements.
Audit committees must examine financial statements and auditor reports, monitor audit process effectiveness, supervise asset valuations, and assess internal financial controls and risk management procedures.
SEBI's LODR guidelines require audit committees to review significant accounting entries involving management's judgment-based estimates and verify their accuracy to ensure transparency in financial reporting.
Audit committees must closely evaluate management's methods for determining ECL, analysing data, assumptions, and models, and ensuring compliance with accounting standards and regulatory frameworks.
NFRA's measures lead to improved audit quality, more detailed audit engagement, enhanced communication between committees and auditors, increased accountability for audit committees, and greater transparency in financial reporting, ultimately strengthening governance.
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