National Financial Reporting Authority

After the Satyam scandal took place in 2009, the Standing Committee on Finance proposed the concept of the National Financial Reporting Authority (NFRA) for the first time in its 21st report.[3] Companies Act, 2013 then gave the regulatory framework for its composition and constitution. The Union Cabinet approved the proposal for its establishment on 1 March 2018. The establishment of NFRA as an independent regulator for the auditing profession will improve the transparency and reliability of financial statements and information presented by listed companies and large unlisted companies in India.[4]

According to Section 132 of Companies Act 2013, "NFRA is responsible for recommending accounting and auditing policies and standards in the country, undertaking investigations, and imposing sanctions against defaulting auditors and audit firms in the form of monetary penalties and debarment from practice for up to 10 years."[4]

Pursuant to the NFRA Rules, 2018, the powers of the NFRA were extended to include the governing of auditors of companies listed in any stock exchange, in India or outside of India, unlisted public companies above certain thresholds, and other companies specified in Rule 3 (1) therein.

Rules 7 and 8 allow for the monitoring of accounting and auditing professionals of the companies referred to in Rule 3 (1).

Companies under Rule 3 (2) and 3 (3) are required to disclose information of their auditors to the NFRA through form NFRA-1.

NFRA consists of one chairman, three full-time members and one secretary.[3] Rangachari Sridharan was appointed as the first chairman of the body in October 2018.[5][3]

Sridharan, a 1983 batch (retired) IAS officer of Karnataka cadre, will hold the post of chairperson, NFRA, for three years or till the incumbent attains the age of 65 years, the order said. Besides him, Prasenjit Mukherjee has been appointed as full-time member of the authority for the same tenure, the order issued by Personnel Ministry said. Mukherjee is a 1980 batch (retired) officer of Indian Audit and Accounts Service.[6]

Due to notification of NFRA, India is now eligible for membership of International Forum of Independent Audit Regulators (IFIAR).[4] Institute of Chartered Accountants of India (ICAI) however, is not open to the establishment of such an authority as it fears reduction in its own powers.[5]

• Public Company Accounting Oversight Board (PCAOB)