National Financial Reporting Authority

In news: The National Financial Reporting Authority (NFRA) has started inspections of five audit firms.

• The Conference on “Financial Reporting & Governance Framework – Building Trust” was organised by the Confederation of Indian Industry(CII)
• There is a need to revisit the existing short-term and vague ‘Going Concern’ accounting concept and replace it with long-term viability or Resilience Statements by the Management and Board.

About NFRA:

• It is the country’s sole independent audit regulator.
• It was constituted in 2018 by the Government of India
• It was established under the Companies Act, 2013.
• It comes under Ministry of Corporate Affairs.

Aim:

• To continuously improve the quality of all corporate financial reporting in India.

Composition:

• Chairperson is a Chartered Accountant and a person of eminence having expertise in accountancy, auditing, finance or law (appointed by the Central Government) and a maximum of 15 members.

Functions and Duties:

• 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

Powers:

• The NFRA has the same powers as the Civil Court.
• Debarring the member/firm from practice as a member of ICAI between 6 months to 10 years as may be decided.
• To investigate the matters of professional or other misconduct.

Scope:

• Companies listed in India
• Unlisted Companies whose:

• Net worth ≥ Rs. 500 crore; or
• Paid up Capital ≥ Rs. 500 crore; or
• Annual turnover ≥ Rs. 1000 crore (As on 31st March of the preceding financial year); OR

• Companies whose securities are listed outside India

Source: The Hindu Business Line