Explore the implications of recent debarments by the National Financial Reporting Authority (NFRA) on Chartered Accountants and firms in India. Understand NFRA’s functions, duties, and its role in ensuring accountability and maintaining financial reporting standards. Stay informed about the penalties imposed and their significance in fostering transparency and credibility in the Indian financial reporting ecosystem.
The financial landscape of India underwent a significant change on October 1, 2018, with the establishment of the National Financial Reporting Authority (NFRA). Instituted under Sub Section (1) of section 132 of the Companies Act, 2013, the NFRA was granted the pivotal role of overseeing financial reporting and audit quality, ensuring transparency, and maintaining the integrity of the country’s financial reporting ecosystem. This regulatory body has been assigned several crucial functions and duties to fulfill its mission.
Functions and Duties of NFRA
As outlined in Sub Section (2) of Section 132 of the Companies Act, 2013, NFRA’s responsibilities encompass:
Recommendation of Accounting and Auditing Policies: The NFRA is authorized to recommend accounting and auditing policies and standards for adoption by companies, subject to the approval of the Central Government. This role aligns with the goal of enhancing financial transparency and consistency across various sectors.
Monitoring and Enforcement of Compliance: Ensuring adherence to accounting and auditing standards is at the heart of NFRA’s mission. By monitoring and enforcing compliance, the authority seeks to maintain the quality and accuracy of financial reporting.
Quality Oversight: The NFRA also assumes the role of overseeing the quality of services provided by professionals involved in ensuring compliance with accounting and auditing standards. This oversight aims to continuously improve the quality of these services.
Additional Functions and Duties: Beyond the aforementioned core responsibilities, NFRA is empowered to perform any other functions or duties incidental to its primary tasks. This flexibility allows the authority to adapt to changing regulatory needs.
The Recent Debarments
One of the critical tools at NFRA’s disposal to ensure compliance is the imposition of penalties and debarments on professionals who violate accounting and auditing standards.
List of Recent Debarments
| Date | Auditor/Firm | ICAI Membership No./FRN | Penalty (in Rs) | Debarment |
| 03/08/2023 | CA T. Raghavendra | 023806 | Five Lakhs | Ten Years |
| 28/07/2023 | M/s ASRMP & Co., | 018350S | Two Crores | Four Years |
| 28/07/2023 | CA A. S. Sundaresha | 019728 | Ten Lakhs | Ten Years |
| 28/07/2023 | CA Madhusudan U A | 238953 | Five Lakhs | Five Years |
| 27/07/2023 | CA Sachin Kansal | 137191 | One Lakhs | One Year |
| 28/06/2023 | CA Devang Dalal | 109049 | Ten Lakhs | Five Years |
| 30/05/23 | CA Chaitanya G. Deshpande | 230802 | Five Lakh | Five years |
| 30/05/23 | CA C. Ramesh | 022268 | Five Lakh | Five years |
| 30/05/23 | M/s Sundaresha & Associates | 008012S | One Crore | Additional Two years |
| 19/05/23 | CA Rakesh Puri | 092728 | Five Lakh | Five years |
| 28/04/23 | CA Hemant Khator | 117596 | Two Lakhs | Two years |
| 28/04/23 | CA Narayan Prasad Swami | 409759 | Two Lakhs | Two years |
| 26/04/23 | CA C. Ramesh | 022268 | Five Lakhs | Five years |
| 26/04/23 | M/s Sundaresha & Associates | 008012S | One Crore | Two years |
| 25/04/23 | CA Lavitha Shetty | 220473 | Ten Lakh | Ten years |
| 21/04/23 | CA Naresh Kumar | 085238 | Three Lakh | Three years |
| 21/04/23 | CA Pankaj Kumar | 091822 | Three Lakh | Three years |
| 13/04/23 | CA Lavitha Shetty | 220473 | Five Lakh | Five years |
| 13/04/23 | CA M Baskaran | 216637 | One Lakh | One year |
| 13/04/23 | CA Harish Kumar T K | 212219 | One Lakh | One year |
| 13/04/23 | CA Mathew Samuel | 022301 | One Lakh | One year |
| 12/04/23 | CA Sam Varghese | 216979 | One Lakh | One years |
| 12/04/23 | CA Pranaav G. Ambekar | 240379 | Five Lakh | Five years |
| 12/04/23 | CA Madhusudan U A | 238953 | Five Lakh | Five years |
| 12/04/23 | CA A. S. Sundaresha | 019728 | Ten Lakh | Ten years |
| 12/04/23 | M/s ASRMP & Co. | 018350S | One Crore | Two years |
| 31/03/23 | CA Ayna Tamton | 220163 | One Lakh | One year |
| 31/03/23 | CA Akash Goel | 419186 | One Lakh | One year |
| 19/09/22 | CA Rajiv Bengali | 043998 | Five Lakh | Five years |
| 19/09/22 | CA Som Prakash Aggarwal | 074813 | Three Lakh | Three years |
| 21/06/22 | CA Gulshan Jagdish Jham | 408315 | One Lakh | One year |
Source- https://nfra.gov.in/
These debarments are not only a measure of accountability but also serve as a deterrent against potential non-compliance. The severity of the penalties and the duration of the debarments underscore the NFRA’s determination to maintain the highest standards of financial reporting.
Implications for Financial Reporting Ecosystem
The NFRA’s actions have far-reaching implications for the financial reporting ecosystem in India. By holding professionals and firms accountable for their actions, the authority sends a clear message that non-compliance will not be tolerated. This, in turn, is expected to foster a culture of greater diligence and responsibility in financial reporting practices.
Furthermore, these actions can potentially enhance investor confidence and protect stakeholders’ interests. Reliable financial reporting is crucial for making informed investment decisions, and the NFRA’s efforts are aligned with strengthening this aspect of the Indian economy.
Conclusion
The establishment of the National Financial Reporting Authority marks a significant step in ensuring the accuracy, transparency, and credibility of financial reporting in India. The recent debarments of CAs and firms underline the NFRA’s commitment to its mandate. As the regulatory landscape continues to evolve, the role of the NFRA in maintaining financial reporting standards and enforcing compliance is likely to become even more crucial, ultimately contributing to a healthier and more robust financial environment in the country.
