Recently the MCA has published National Financial Reporting Authority Rules, 2018 (NFRA Rules) to keep check on compliance of accounting standards and policies by the companies & also to penalize the defaulters.
For Published Rules click => National Financial Reporting Authority Rules, 2018 (NFRA Rules)
Now, the question is what is NFRA & what are its functions & powers?
So here we discuss possibly all of it………………National Financial Reporting Authority has been constituted under Section 132 of the Companies Act, 2013 for performing the functions prescribed under Sub-Section 2 of Section 132.
Function of NFRA
- Make recommendation to Central Government (CG) on formulation of accounting/auditing policies/standards.
- Monitoring & enforcing the Accounting & auditing standards’ compliance.
- Oversee the service quality of associated professions ensuring compliance with such standards & suggesting improvement measures if required.
- Performing such other functions related to above functions.
Powers of NFRA
- Investigating (Suo moto or on reference made by CG) into professional/other misconduct committed by any member/firm of Chartered Accountants.
- Same powers as civil court under CrPC, 1908, on trying suit in following respect:
- Discovery & production of Books of Accounts/any other documents.
- Summoning & enforcing attendance of person & examining them on oath.
- Inspection of any books, registers & other documents of persons mentioned above.
When professional/other misconduct proved, then NFRA have following powers:
- Imposing penalty
Individual Professional – Minimum 1 Lakh rupees, maximum 5 times of the professional fee received.
Firm – Minimum 5 Lakh rupees, maximum 10 times of the fee received.
- Debarring the member or firm from engaging into CA Practice for minimum 6 months but up to 10 years.
CRUX OF NFRA RULES, 2018
- Rule3(1)-Classes of companies governed by NFRA Rules are as follows:
- Listed Companies
- Unlisted Companies having PUC of INR 500 Cr or more, or annual turnover of INR 1000 Cr or more, or outstanding loans, debentures and deposits of more than INR 500 Cr or more as on 31st March of immediately preceding financial year.
- Insurance companies, banking companies with electricity generation or supply business, companies governed with special act or companies incorporated in reference with clause (b) to (f)of Section 1(4)
- Any reference made by CG to NFRA
- Body corporate (BC) registered outside India, which is subsidiary/associate company of companies/BC registered in India with income/Net Worth (NW) of subsidiary or associate company is more than 20% of consolidated income/NW.
Reporting Requirement
Reporting of Details of auditor is required to be made by companies mentioned under Rule 3(2) in Form NFRA-1 within 30 days from notification of these Rules.
- Rule 3(2)– Companies & Body corporate not covered in Rule 3(1) required to file form NFRA-1.
- Rule 3(3)-Body corporate other than Companies defined under Section 2(2) required to intimate appointment of auditor within 15 days in form NFRA-1.
- Rule 5-Auditor’s referred in Rule 3 required to file Annual Return on or before 30th April every year.
{The author is a Company Secretary in Practice & can be reached at (M) 9811888288 (E) mail@csdeepikashukla.com}
Author Bio
Are the Rules published in Gazette?
Is Form NFRA 1 available for downloading on the website of MCA 21?