If you thought that the Modi government had abandoned plans to set up National Financial Reporting Authority (NFRA) to regulate audit quality, think again.

The Centre is clearly inclined to go ahead and set up NFRA going by the latest amendment moved to the company law on Thursday last, say economy watchers.

As part of the 43 amendments introduced to the Companies (amendment) Bill 2016, the Centre has come up with a new provision that specifies that all appeals to NFRA will lie with the National Company Law Appellate Tribunal (NCLAT).

This is a clear pointer to the fact that the sanctity of NFRA under the company law is being preserved and it could be a reality in days to come, they said.

The Companies (amendment) Bill 2016 was passed on Thursday by the Lok Sabha and is awaiting passage in the Upper House.

Amarjit Chopra, Chairman of National Advisory Committee on Accounting Standards and former CA Institute President, told BusinessLine that “looking at this amendment, it appears that the government may constitute NFRA in times to come”.

Another former President of the CA Institute on condition of anonymity said this (latest government move) only can mean they are going ahead with NFRA. “If they were not to constitute it (NFRA), why should they bring this amendment?”, he asked.

Dissenting voices

The CA Institute has been opposed to the setting up of NFRA.

The Veerappa Moily-headed Standing Committee on Finance had also recommended that it is not in favour of establishing a separate regulator — independent of audit profession — for auditors. Technically, the government need not accept a recommendation of a Standing Committee.

Under the current company law, enacted in 2013, the NFRA has been envisaged as an independent quasi-judicial body that would regulate audit quality and protect public interest. The Centre is yet to operationalise the NFRA.

In its report on the Companies (amendment) Bill 2016, which was tabled in the Lok Sabha in December last year, the Standing Committee on Finance had said that the existing mechanism on oversight of corporate audit under the ICAI Act should be streamlined and strengthened “without needlessly adding to regulatory levels”. #casansaar (Source - The Hindu Business)