Authority to build confidence in financial disclosures

India is setting up National Financial Reporting Authority (NFRA) which is expected to result in improved foreign/domestic investments.

As an independent regulator, it would enhance investor and public confidence in financial disclosures of companies.

NAFRA, approved by cabinet on 1 Mar 2018, will help enhance economic growth, support the globalisation of business by meeting international practices, and assist in further development of audit profession.

The need for NFRA has arisen on account of the need felt across various jurisdictions in the world, in the wake of accounting scams, to establish independent regulators.

It will stay independent from those it regulates, for enforcement of auditing standards and ensuring the quality of audits to strengthen the independence of audit firms and quality of audits.

NFRA is one of the key changes brought in by the Companies Act, 2013. It will have one Chairperson, three full-time Members and one Secretary.

The inclusion of the provision in the Act was on the specific recommendations of the Standing Committee on Finance.

The jurisdiction of NFRA for investigation of Chartered Accountants and their firms under section 132 of the Act would extend to listed companies and large unlisted public companies, the thresholds for which shall be prescribed in the Rules.

The Central Government can also refer to NAFRA such other entities for investigation where public interest would be involved.

The inherent regulatory role of Institute of Chartered Accountants of India (ICAI) as provided for in the Chartered Accountants Act, 1949, shall continue.

The Quality Review Board (QRB) will also continue quality audit in respect of private limited companies, public unlisted companies below prescribed threshold and also with respect to audit of those companies that may be delegated to QRB by NFRA.

Further, ICAI shall continue to play its advisory role with respect to accounting and auditing standards and policies by making its recommendations to NFRA. fii-news.com