CFO Service Financial Reporting

National Financial Reporting Authority (NFRA) in India

The Companies Act, 2013 has introduced many new concepts out of one is the introduction of new authority called National Financial Reporting Authority(NFRA).

The Central Government may by notification constitute a National Financial Reporting Authority. The main purpose of constituting an authority is to provide for matters relating to accounting and auditing standards under the Companies Act.

The duty of National Financial Reporting Authority (NFRA)

National Financial Reporting authority shall:

• Make a recommendation to the CG for formulation and laying down of accounting and auditing policies and standards which shall be adopted by the company or class of companies or auditors.
• Monitor the compliance with accounting standards and auditing standards in the manner prescribed.
• Oversee the quality of service of the professions associated with ensuring compliance with such standard.
• Suggest for improvement required quality of service and such other related matters as may be prescribed
• Any other activity related to above.

Constitution of National Financial Reporting Authority (NFRA)

• NFRA shall have one Chairperson and other maximum fifteen part-time or full-time members.
• The Chairperson shall be appointed by Central Government or shall have expertise in accountancy, auditing, finance or law.
• While the appointment of chairperson and members, the declaration stating no conflict of interest or lack of independence in respect of his or their appointment shall be taken.
• The chairperson and members, who are in full-time employment with NFRA shall not be associated with any audit firm or consulting firm during their term and two years after cessation of their office.

Power of National Financial Reporting Authority (NFRA)

• NFRA by its own or on the recommendation of CG can investigate such class of bodies corporate or personal such manner as may be prescribed into the matters of professional or other misconduct committed by any member or firm of chartered accountants, registered under the Chartered Accountants Act, 1949.
• Have same powers vested in civil court while trying a suit, in respect of the following matters:
• Discovery and production of books of account and other documents
• Summoning and enforcing the attendance of persons and examining them on oath
• Inspection of any books, registers and other documents of any person
• Issuing commissions for the examination of witnesses or documents.
• Any professionals or any misconduct is proved that have the power to impose penalty 1lakh to 5times of fees in case of an individual or 10 Lakh to ten times of fees in case of firms and can debar them from practice as a member of ICAI for 6months to 10 years.

Appeals:

• Any person aggrieved by any order of the National Financial Reporting Authority issued may appeal to the Appellate Authority constituted for the same.
• The Central Government by notification can constitute an appellate authority.
• Appellate Authority shall constitute with one chairperson and maximum 2 members appointed by CG for hearing appeals arising out of the orders of the National Financial Reporting Authority.
• The qualifications of the chairperson and members of the Appellate Authority while appointment, the manner of selection, the terms and conditions of their service and the requirement of the supporting staff and procedure shall be as may be prescribed.
• The officer authorized by the Appellate Authority shall prepare an annual report giving a full account of its activities. The annual report shall be submitted to the Central Government and same shall be laid before each House of Parliament.

Audit:

• The NFRA shall maintain books of account and other books in relation to its accounts in consultation with the Comptroller and Auditor-General of India prescribe.

The accounts of the National Financial Reporting Authority shall be audited by the Comptroller and Auditor-General of India the intervals specified by him and the accounts shall be certified by the Comptroller and Auditor-General of India. Same shall be forwarded annually to the Central Government by the National Financial Reporting Authority.

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