Compliance For Statutory Auditor- NFRA-2

Compliance For Statutory Auditor- NFRA-2 (Annual Return To Be Filed By Auditor With National Financial Reporting Authority)

Introduction:

This new Form NFRA-2 has to be filed by the Statutory Auditor of the Company in pursuance of section 132 of Companies Act, 2013 and Rule 5 of NFRA Rules, 2018.

S. 132 of the Act refers to ‘Constitution of National Financial Reporting Authority’ which states the roles and responsibility of the NFRA for matters relating to accounting and auditing standards under the Companies Act, 2013.

Rule 5 of NFRA Rules, 2018 provides that every auditor referred to in Rule 3 of NFRA Rules, 2018 shall file a return with the Authority on or before 30th April every year in such form as may be specified by the Central Government. With The National Financial Reporting Authority (Amendment) Rules, 2019 Dated 05.09.2019, the provisions of Rule 5 been modified in respect of due date of filling of such annual return. The New form NFRA-2 is the form for filling Annual Return notified by Central government in official Gazette on 05.09.2019 in this regard.

Now lets discuss Rule 3 of NFRA Rule, 2018 which is very important rule which in other words provide for requirement of filling of Form NFRA 2 (Annual Return) by auditors for which classes of companies and bodies corporate governed by the Authority.

Classes of companies and bodies corporate governed by the Authority

Rule 3 gives power to the Authority (NFRA) to monitor and enforce compliance with accounting standards and auditing standards, oversee the quality of service or undertake investigation as per s.132 of the auditors of the following class of companies and bodies corporate, namely:-

(a) All companies listed on any stock exchange in India or outside India;

(b) unlisted public companies

• • having paid-up capital of not less than Rs. 500 crores; or
  • having annual turnover of not less than Rs. 1000 crores; or
  • having, in aggregate, outstanding loans, debentures and deposits of not less than Rs. 500 crores as on the 31st March of immediately preceding financial year;

(c) Insurance/ Banking/ Companies engaged in the generation or supply of Electricity, companies governed by any special act;

(d) any class of or any other body corporate or company or person, on a reference made to the Authority by the Central Government in public interest; and

(e) a body corporate incorporated or registered outside India, which is a subsidiary or associate company of any company or body corporate incorporated or registered in India as referred to in clauses (a) to (d), if the income or networth of such subsidiary or associate company exceeds 20% of the consolidated income or consolidated networth of such company or the body corporate, as the case may be, referred to in clauses (a) to (d).

Penalty for non-compliance

The common provision of s. 450 of the Act has been specified in Rule, 13 of NFRA, 2018 for such non-compliances of NFRA Rules, 2018. Where s. 450 of the Act provides for fine which may extend to Rs. 10,000/-, and where the contravention is continuing one, with a further fine which may extend to Rs. 1000/- per day during which the contravention continues.

Hope that we will not miss this compliance and one can refer NFRA Rules, 2018 for detail powers and duties of NFRA. The official notification and Form NFRA 2 is available at MCA portal and the link is as below:

 https://taxguru.in/company-law/national-financial-reporting-authority-amendment-rules-2019.html

Disclaimer: The above article is based on information available & my understanding. There can be other opinion as well.