The proposed auditors’ watchdog, National Financial Reporting Authority (NFRA), will soon become a reality and is expected to be set up in the next two months, a senior government official said.

The Cabinet approved the proposal of setting up of NFRA as an independent regulator for the chartered accountants, for enforcing their accounting and auditing standards, therefore, enhancing investor and public confidence in financial disclosures of companies.

This was also one of the key recommendations that was brought about by the Companies Act, 2013. The decision to set up auditor’s watchdog came in with corporate scams coming out in the open, including the Nirav Modi’s bank fraud that was unearthed in February, 2018.

“The government has already notified the rules related to NFRA. We have also sought applications for the post of chairman and three full-time members. The body would soon be coming up,” the official said.

NFRA will also have the power to investigate, either suo motu or if there is a reference made to it by the government, according to the rules released by ministry of corporate affairs. In addition, the authority will also have the power to penalise any member or firm of chartered accountants.

In case of individuals, fine up to Rs one lakh can be slapped, and it can be extended to five times of the fees received. For firms, the penalty amount will be Rs 10 lakhs, which can be extended to ten times of the fees received.

According to the rules, the authority can also debar the firm engaging in practice as member of the Institute of Chartered Accountant of India (ICAI).

The inherent regulatory role of ICAI will continue, especially with respect to audits pertaining to private and public unlisted companies’ rules. It will continue with its advisory role on accounting and auditing standards by making its recommendations to NFRA. #casansaar (Source - MoneyControl)