Ten years ago the Enron scam prompted the Sarbanes Oxley Act with measures to improve governance standards in corporate America and so was born the Public Company Accounting Oversight Board. PCAOB oversees the audits of public companies, has 2363 accounting firms registered with it, a staff of 766 and a budget of 245 million dollars.

A similar chain of events has occurred in India – where the Satyam scam has led to stronger governance measures in the Companies Act 2013, which in turn creates the National Financial Reporting Authority. the NFRA is tasked with  standard setting, overseeing compliance and quality and enforcement. Headed by a Chairman - it can have upto 15 members including 3 full time members for Accounting, Auditing And Enforcement, each of whom will head individual committees. In cases of professional misconduct the NFRA can impose substantial penalties and also debar indivduals and firms. So far the ICAI was doing the same job. So will the NFRA eclipse the ICAI? and will it do a better job of audit regulation?

NEW AUDIT REGULATOR
NFRA: Selection Committee

Draft Rules
• CJI or his nominee
• MCA Secretary
• Ministry of Law & Justice Secretary
• Reputed CA
• Selection Committee: One year term

NEW AUDIT REGULATOR
NFRA: Composition

Companies Act, 2013
• Chairperson + Upto 15 part-time/full-time members
• Chairperson & members to be independent
• Chairperson & full-time members cannot be associated with audit/consultancy firm during membership + 2 years after

NEW AUDIT REGULATOR
NFRA: Composition

Draft Rules
• Chairperson                                      
• Accounting Member
• Auditing Member
• Enforcement Member
• Representatives from MCA, RBI, SEBI
• Retired High Court Chief Justice or Judge of minimum 5 years
• ICAI President

NEW AUDIT REGULATOR
NFRA: Powers

Companies Act, 2013:   In case of professional misconduct
• Impose penalty of Rs 1lakh to 5 times fees received by individual
• Impose penalty of Rs 10 lakhs to 10 times fees received by firm
• Debar member/firm for 6 months – 10 years

(Source :- moneycontrol.com)