The National Financial Reporting Authority (NFRA) has made it clear that it has oversight powers on the auditors of nationalised banks (public sector banks) as well.

There was a contention that PSBs don't fall within the definition of 'banking companies' under the NFRA rules and, therefore, auditors of PSBs can't be subjected to regulatory oversight by NFRA. However, NFRA has now amended the rules to include even "new corresponding banks" (basically all PSBs) within its scope. 

This would mean that NFRA has been empowered to monitor and enforce compliance with accounting standards and auditing standards; oversee the quality of service rendered by auditors in public sector banks and even undertake investigation of the auditors of the PSBs. This will also apply to auditors of the erstwhile subsidiary banks of State Bank of India, implying that NFRA can take action on auditors of the subsidiary banks, although they may have now been merged with parent State Bank of India.

It may be recalled that the Centre had in November last year notified the NFRA rules, taking away the CA Institute’s monitoring and disciplinary powers over auditors of listed entities and large unlisted companies besides banks and insurance companies.

The NFRA — the newly set up independent regulator of the audit profession — has become the all-powerful body when it comes to disciplining auditors and overseeing the quality of service rendered by chartered accountants at large entities.

The Union Cabinet had on March 1 last year approved the setting up of independent regulator NFRA that will have sweeping powers to act against erring auditors and auditing firms.

According to the then notified rules, the NFRA has the power to monitor and enforce compliance with accounting standards and auditing standards, oversee the quality of service and undertake investigation of the auditors of listed entities; unlisted entities with paid-up capital of not less than Rs.500 crore or annual turnover of over Rs.1,000 crore or those having aggregate loans, debentures or deposits of not less than Rs.500 crore as of March 31 of the preceding financial year.

The NFRA will also have oversight over auditors of banks, insurers, electricity firms and also those body corporates referred to it by the Centre. #casansaar (Source - SriVats - The Hindu)