NFRA (National Financial Reporting Authority) has been notified in terms of Section 132 of the Companies Act, 2013. By reading this concise article, you will get to know about the Global Overseeing System (in America, UK and China) and the powers given in India to NFRA.
NFRA – GOING GLOBAL
A. NFRA to work through its DIVISIONS:
MCA has recently issued a Notice inviting comments on certain proposed amendments in relation to Companies Act, 2013. The suggestions may be sent till 20.11.2018 @ [email protected]
One of the MAJOR CHANGE is in Section 132 of the act relating to National Financial Reporting Authority (NFRA) that NFRA shall perform its functions through Divisions.
The divisions (once set-up) will have powers such as issuing accounting Standards, regulating firms by registration, inspection and investigations, hearing and awarding sanctions.
B. Global Best Practices to oversee Audit Quality:
Let’s look at the Global Best Practices in relation to supervision of audit firms:
Securities and Exchange Commission (SEC) oversee audit firms of listed corporate clients through its divisions PCAOB, FASB, Enforcement Authority, Office of Administrative Law Judge.
UNITED KINGDOM –
Financial Reporting Council (FRC) oversee audit firms through Multiple Self-regulatory Organizations (SROs), Codes and Standards Committee, Conduct Committee, Tribunal.
License to audit firms is given by Chinese Securities Regulatory Commission (CSRC), Ministry of Finance (MOF).
For auditors of listed companies, CSRC is the regulatory body whereas Local CPA Institutes (under the control of CICPA) in different provinces are the regulatory bodies for unlisted corporate entities.
India is also moving towards Global Best Practices to ensure Quality of Audits through NFRA.
C. Powers of NFRA:
## Monitoring and Regulating Powers – recommend CG w.r.t. AS and SAs and checking proper compliance of the same, oversee quality of audit firms.
## Investigating and Summoning Powers – Investigation of audit firms, summoning and enforcing attendance, Inspection of records.
## Penalizing Powers – Individual Auditors (INR 1 Lakh to 5 times of Fees), Firm of Auditors (INR 5 Lakhs to 10 times of Fees).
## Debarring Powers – Debarring from Practice as a member of ICAI for a period of 6 months to 10 years.