The NFRA is on its way and we will get notified about it soon. NFRA stands for National Financial Reporting Authority and our Government is planning to introduce the National Financial Reporting Authority (NFRA) soon. NFRA seeks to rein in the Institute of Chartered Accountants for India (ICAI) for its perceived failure in enforcing discipline.
The Companies Act, 2013 consists of Section 132 and it provides for the establishment of the National Financial Reporting Authority. However, provision regarding it has not been notified yet.
Under the Companies Act, 1956, provisions, the Centre was to prescribe accounting standards prepared by ICAI in consultation with the National Advisory Committee on Accounting Standards (NACAS).
These types of powers can be transferred to NFRA under the 2013 Act. However, when it will be in action then NFRA would have taken away several powers that are currently vested with ICAI. There were rumors in the air that several chartered accountants had successfully lobbied with the government to stop or block the notification.
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The matter was on the backseat for the last few years but is now on driving seat again. It happened when Prime Minister Narendra Modi publicly aired his criticism over ICAI’s disciplinary record -a charge that the institute is now trying to cope with.
It is the matter that comes to light at the CA Day event held on July 1, and in it Modi had said that just around 25 auditors had faced any type of action in over a decade and the number of pending cases reached around 1,400. ICAI is expected to fix all the issues shortly, but that has not stopped the government from considering the NFRA for reopening.
When NFRA comes into action it will look into matters of professional or other misconduct and it will also have the power to suspend CAs and firms from practicing for six months to 10 years. Some sources said that various possibilities and options were being considered for the agency and a new mechanism for appeal was also being considered.
This news is coming at a time when ICAI is pushing to revise joint audits of Indian companies after its own plea for a mechanism was rejected by a committee’s report to the Prime Minister’s Office. The committee was headed by Ashok Chawla former chairman of the Competition Commission of India.