Strengthening NFRA: Govt examining panel proposals

Strengthening NFRA: Govt examining panel proposals

Subject: Economy

Section: Regulatory Body

Context: The Centre on Saturday said it is committed to strengthening the working of the National Financial Reporting Authority (NFRA), the independent regulatory body setup under the Corporate Affairs Ministry for the auditing professional.

Concept:

• NFRA is an independent regulatory body set up under Section 132 of the Companies Act.
• It was established by the Central Government in October 2018.
• After the Satyam scandal took place in 2009, the Standing Committee on Finance proposed the concept of the National Financial Reporting Authority (NFRA) for the first time in its 21st report.
• The National Financial Reporting Authority (NFRA) was constituted in 2018 under Companies Act, 2013.
• The Companies Act requires the NFRA to have a chairperson who will be appointed by the Central Government and a maximum of 15 members

The duties of the NFRA are to:

• Recommend accounting and auditing policies and standards to be adopted by companies for approval by the Central Government;
• Monitor and enforce compliance with accounting standards and auditing standards;
• Oversee the quality of service of the professions associated with ensuring compliance with such standards and suggest measures for improvement in the quality of service;
• Perform such other functions and duties as may be necessary or incidental to the aforesaid functions and duties.
• Prior to the constitution of this authority, the Central Government would prescribe accounting standards on the recommendation of ICAI.
• The Authority shall have power to monitor and enforce compliance with accounting standards, oversee the quality of service or undertake investigation of the auditors of the following class of companies and bodies corporate, namely:-
• Companies whose securities are listed on any stock exchange in India or outside India;
• Unlisted public companies having paid-up capital of not less than rupees five hundred crores or having annual turnover of not less than rupees one thousand crores or having, in aggregate, outstanding loans, debentures and deposits of not less than rupees five hundred crores as on the 31st March of immediately preceding financial year;
• Insurance companies, banking companies, companies engaged in the generation or supply of electricity
• Anybody corporate or company or person, or any class of bodies corporate or companies or persons, on a reference made to the Authority by the Central Government in public interest;
• HQ: New Delhi