National Financial Reporting Authority (NFRA) Rules
November 20, 2018
CA Chandan Agarwal's Office
NFRA Rules
A. Applicability:
NFRA will monitor BIG COMPANIES AS FOLLOWS:
a. ALL Listed Companies/ Body Corporates; OR
b. Unlisted Companies with Paid up Capital or Loans > = INR 500 crores OR Turnover > = INR 1000 crores; OR
c. ALL Banks/Insurance/Electricity Companies; OR
d. Certain specific foreign Subsidiaries/Associates of Indian Companies.
Note – For auditor of these Companies, ICAI do not have any investigation role.
COMPANY/AUDITOR ONCE GOVERNED BY NFRA WILL BE COVERED BY NFRA for 3 MORE YEARS EVEN IF LIMITS ARE REDUCED/ LISTED STATUS CHANGES.
For Other Companies, ICAI will have the power to initiate disciplinary proceedings.
B. Powers and Responsibilities of NFRA
Notifying Accounting Standards & Auditing Standards – Firstly, ICAI will Recommend, Then NFRA will check, Then Forward to Central Government for approval
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.
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 30th April every year.
D. Powers under Section 132 of the Companies Act, 2013
Monitoring and Regulating Powers – recommend CG w.r.t. AS and SAs and checking proper compliance of the same, oversee quality of audit firms.
Investigating and Summoning Powers – Investigation of audit firms, summoning and enforcing attendance, Inspection of records.
Penalizing Powers – Individual Auditors (INR 1 Lakh to 5 times of Fees), Firm of Auditors (INR 5 Lakhs to 10 times of Fees).
Debarring Powers – Debarring from Practice as a member of ICAI for a period of 6 months to 10 years.
