NFRA- Applicability, Power, Responsibilities and Filings

A. Applicability:

NFRA will monitor Following Companies –

(i) ALL Listed Companies/ Body Corporates

(ii) Unlisted Companies with Paid up Capital or Loans > = INR 500 crores OR Turnover > = INR 1000 crores

(iii) ALL Banks/Insurance/Electricity Companies.

(iv) Certain specific foreign Subsidiaries/Associates of Indian Companies.

Note –

i. For auditor of these Companies, ICAI do not have any investigation role.

ii. COMPANY/AUDITOR ONCE GOVERNED BY NFRA WILL BE COVERED BY NFRA for 3 MORE YEARS EVEN IF LIMITS ARE REDUCED/ LISTED STATUS CHANGES. !!!

iii. For Other Companies, ICAI will have the power to initiate disciplinary proceedings.

B. Powers and Responsibilities of NFRA

i. Notifying Accounting Standards & Auditing Standards –

“ICAI Recommend —— NFRA will check —— Recommend CG for Notifying it”

ii. Monitoring Compliance of AS –

For AS compliance, NFRA may review FS of such Companies and ask for further Information, seek additional information, initiate for penal proceeding if any wrongdoing.

iii. Monitoring Compliance of SA –

For SA Compliance, NFRA may review Auditor Working papers, check Sufficiency of Quality System within the Audit Firm, Supervise or Test the audit.

Note – Means for Big Companies, Peer Reviewing Powers are now with NFRA and not with ICAI.

C. Filings with NFRA

• Notice to the authority by Body Corporate (other than Company) regarding Auditor – Form NFRA -1
• Auditor of Big Companies required to file ANNUAL RETURN to NFRA till 30^th April every year.

D. Powers under Section 132 of the Companies Act, 2013

i. Monitoring and Regulating Powers –

Recommend CG w.r.t. AS and SAs and checking proper compliance of the same, oversee quality of audit firms.

ii. Investigating and Summoning Powers –

Investigation of audit firms, summoning and enforcing attendance, Inspection of records.

iii. Penalizing Powers –

Individual Auditors (INR 1 Lakh to 5 times of Fees), Firm of Auditors (INR 5 Lakhs to 10 times of Fees).

iv. Debarring Powers

Debarring from Practice as a member of ICAI for a period of 6 months to 10 years.

Contributed by: CA Bipin Kumar Jha, CA Yogesh Raheja

Also Read-National Financial Reporting Authority (NFRA) Rules, 2018