National Financial Reporting Authority

• 21 Jul 2020

Why in News

Recently, the National Financial Reporting Authority (NFRA) has constituted a Technical Advisory Committee (TAC) to aid and advise the executive body of the NFRA on issues relating to drafts of accounting standards and auditing standards.

• The TAC comprises seven members including the chairman - R. Narayanaswamy.

Key Points

• Constitution: NFRA was constituted in 2018 by the Government of India under section 132 (1) of the Companies Act, 2013. It is an audit regulator.
• Background: The decision to constitute the NFRA was taken after the role of auditors and the Institute of Chartered Accountants of India came under the scanner for alleged lapses in various corporate scams including that at the Punjab National Bank.
• Composition: It consists of a chairperson, who shall be a person of eminence and having expertise in accountancy, auditing, finance or law, appointed by the Central Government and such other members not exceeding 15.
• 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.
  • Protect the public interest.
• Powers:
  
  • It can undertake investigation related to 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 Rs. 500 crores or having annual turnover of not less than Rs. 1,000 crores or having, in aggregate, outstanding loans, debentures and deposits of not less than Rs. 500 crores as on the 31^st March of immediately preceding financial year.
    • Insurance companies, banking companies, companies engaged in the generation or supply of electricity.
  • Where professional or other misconduct is proved, it has the power to make order for imposing penalty of—
    
    • not less than one lakh rupees, but which may extend to five times of the fees received, in case of individuals; and
    • not less than ten lakh rupees, but which may extend to ten times of the fees received, in case of firms.
• Its account is monitored by the Comptroller and Auditor-General of India.
• It is headquartered in New Delhi.