The Union Cabinet on March 1 approved setting up of the National Financial Reporting Authority (NFRA), which will be an independent regulator for the auditing profession. The decision comes against the backdrop of various auditing lapses in the banking sector, including the Rs 12,700 crore fraud at Punjab National Bank.
What is NFRA?
"The NFRA will act as an independent regulator for the auditing profession which was one of the key changes brought in by the Companies Act, 2013," Corporate Affairs Minister Arun Jaitley said. NFRA would be an oversight body for auditors and its jurisdiction would extend to all listed companies as well as large unlisted public companies. National Financial Reporting Authority (NFRA) is a body proposed in Companies Act 2013 for the establishment and enforcement of accounting and auditing standards and oversight of the work of auditors.
Institute of Chartered Accountants of India (ICAI) will continue to have monopoly on training and qualifying chartered accountants, giving them licence to practice and regulating them including scrutinising audit quality. It cam exercise these powers over small companies. NFRA is not meant to replace the disciplinary jurisdiction of the ICAI.
The Companies Act, 2013, says that “no other institute or body shall initiate or continue any proceedings in such matters of misconduct where the National Financial Reporting Authority has initiated an investigation.” NFRA shall: (a) have the power to investigate, either suo motu or on a reference made to it by the Central Government, for such class of bodies corporate or persons, in such manner as may be prescribed into the matters of professional or other misconduct committed by any member or firm of chartered accountants, registered under the Chartered Accountants Act, 1949; and (b) have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit.