The concept of having a body such as National Financial Reporting Authority is not new as such. The Institute of Chartered Accountants of India already has many of these powers. As per section 211(3C) of Companies act 1956, every balance sheet and profit & loss account of the Company shall comply with the accounting standards, as may be prescribed by the Central
Government in consultation with the National Advisory Committee on Accounting Standards (NACAS). Therefore, section 210A was enacted to constitute NACAS to advise the Central Government on the formulation and lying down of accounting policies and accounting standards for adoption by companies or class of companies under this Act
In Companies Act, 2013, the nomenclature of National Advisory Committee on Accounting Standards (NACAS) has been changed as National Financial Reporting Authority (NFRA) and unlike NACAS it will not merely be an advisory body but a regulatory authority for auditing, accounting and financial reporting. The role of the Authority has been extended to advice on matters related to Auditing Standards in addition to Accounting Standards and also to act as a regulatory body for accountancy profession.
As per Companies Act 2013, Central Government may by notification constitute a National Financial Reporting Authority to provide for Accounting and Auditing Standards.
Auditing standards will be prescribed by the Central Government after recommendation of ICAI and in consultation by the National Financial Reporting Authority. Till such auditing standards are notified, standards specified by the ICAI shall be deemed to be auditing standards.
COMPOSITION OF NFRA:
Central Government will appoint maximum 15 members, excluding the Chairperson whether whole time or part time. Chairperson should possess expertise in accounting, auditing, finance or law.
The CG can also appoint a secretary and other employees for efficient performance of the functions of NFRA.
Members and chairperson who are in full time employment should not to be associated with any audit firm including any related consultancy firms during their tenure and 2 years after ceasing to be a member of NFRA. They are also required to make a declaration to CG regarding no conflict of interest or lack of independence.
The head office of the NFRA will be at New Delhi. However, meetings can be held at such other places in India.
CG shall lay down rules regarding place and frequency of meetings alongwith manner of transacting businesses.
CG in consultation with C&AG of India shall prescribe the form and manner in which books of accounts and other books will be maintained.
Audit of the accounts of NFRA will be performed by C&AG and report will be forwarded to CG annually.
NFRA shall prepare and forward an annual report as certified by C&AG giving its full activities to the CG which will be laid before each house of the Parliament alongwith annual report and audit report.
DUTIES OF NFRA:
To provide recommendation to the central government regarding formulation and laying down of accounting and auditing policies and standards.
Quality of service:
To oversee the quality of service of the professions involved in compliance of standards and suggesting measures to bring improvement in quality of such services.
To ensuring proper compliances with the standards
Professional misconduct of chartered accountants as defined under section 22 of Chartered accountant act, 1949.
POWERS OF NFRA:
• Matters of professional or other misconduct
• If investigation already launched by NFRA,no simultaneous proceeding will be launched by any other body
Civil Court Powers:
• Discovery and production of books, Inspection of books and registers
• Summoning and enforcing attendance of persons, issuing commissions for examination
• In case of individuals, minimum Rs 1,00,000 and maximum 5 times of fees received
• In case of firms, minimum Rs 10,00,000 and maximum 10 times of fees received
Debarring the firm of CA or Individual CA from practice for minimum 6 Months and maximum 10 years.
1. The Central Government may by notification appoint an Appellate Authority consisting of a chairman and 2 other members for hearing the appeals for the persons aggrieved from the orders of NFRA.
2. The CG also Prescribe the Qualifications, terms and conditions of service, manner of selection of the Chairman and members of appellate authority.
3. The fees for filling appeals will also be prescribed by the CG.
4. The officer authorised by appellate authority shall prepare and forward an annual report giving its full activities to the CG which will be laid before each house of the Parliament.