National Financial Reporting Authority (Section 132) - CA Inter/ CMA Inter

1. www.takshilalearning.com Constitution of the National Financial Reporting Authority (Section 132) – CA Inter/ CMA Inter National Financial Reporting Authority What is the National Financial Reporting Authority (NFRA)? National Financial Reporting Authority The NFRA is an authority formed under Section 132of the Companies Act, 2013. It became functional on October 1, 2018, after an approved proposal in March 2018. The NFRA has been established as an independent controller to oversee the auditing profession and accounting standards in India. NFRA is also accountable for enforcing and monitoring accounting procedures. Also, this authority is responsible for various auditing standards in the country. It is also accountable to impose sanctions against defaulting auditors and audit firms. Such sanctions can be in the form of debarments and monetary penalties. Constitution of the National Financial Reporting Authority Ministry of C orporate Affairs approved the proposal for the constitution of the National Financial Reporting Authority in March 2018. The NFRA acts as an independent regulator for the auditing profession after the notification of various provisions of section 132 of the Companies Act, 2013. It is one of the major changes brought into the C ompanies Act, 2013. The provision got incorporated into the Companies Act on account of the recommendations of the Finance C ommittee in its 21 report. What led to the constitution of the National Financial Reporting Authority? The necessity for the constitution of the NFRA arose during the wake of accounting scams, primarily the Satyam scandal that took place in 2009. The Call 08045681010 / 8800999284

2. www.takshilalearning.com finance committee proposed the constitution of the NFRA to enforce and reinforce auditing standards and to strengthen the independence of audit firms. The C entral Government constituted the National Advisory C ommittee on Accounting Standards (NAC AS) under Section 210A of the Companies Act, 1956. Until then, the NAC AS suggested the central government regarding the formulation and laying down of accounting standards and auditing policies. However, the National Financial Reporting Authority (NFRA) later replaced the NAC AS as per the new C ompanies Act, 2013. NFRA was made to be a quasi- judicial body that would administer and regulate aspects regarding accounting standards and auditing. Member Composition of the National Financial Reporting Authority The NFRA consists of the following members: The C entral Government appoints one C hairperson from time to time. The chairman must have expertise in accountancy, auditing, finance or law. Three posts of full-time members One post of Secretary    Impact of the National Financial Reporting Authority NFRA’ s implementation brought various changes and recommendations in accounting and audition policies and standards. The committee enforces and monitors the compliance of businesses. It also oversees the services of professionals and their compliance with accounting and auditing standards. Jurisdiction of the National Financial Reporting Authority NFRA’ s jurisdiction includes Chartered Accountants and their respective firms that may be both – listed and unlisted. The Quality Review Board (QRB) continues to perform quality audits of both private and public companies. The QRB also performs quality audits of companies that get delegated by the NFRA Call 08045681010 / 8800999284

3. www.takshilalearning.com to the QRB. Further, the Institute of C hartered Accountants of India (IC AI) also plays an important role to provide suggestions regarding accounting and auditing standards and policies and makes various recommendations to the NFRA. As provided for within the Chartered Accountants Act, 1949, the role of IC AI continues with respect to audits regarding private and public and listed and unlisted companies that are below the edge limit. What are the powers of the National Financial Reporting Authority? Section 132 (4) of the C ompanies Act, 2013 empowers NFRA with the following – (i) It can perform investigation for various bodies – both corporate and persons, regarding the matters of professional misconduct or other forms of misconduct committed by any member of the firm of C hartered Accountants that are registered under the Chartered Accountants Act, 1949. (ii) The National Financial Reporting Authority has duties, responsibilities and powers as given under the C ode of C ivil Procedure, 1908, in respect of the following matters: Discovery of books of account and other documents and their production; Summoning the attendance of persons along with enforcing and examining them on oath; Inspection of various documents including books and registers of a person as mentioned above; and Issuing commissions for evaluation and examination of various witnesses and documents.     What is the role of the National Financial Reporting Authority? The NFRA has the following responsibilities: 1.To create recommendations on the foundation of accounting and auditing policies and standards. 2.To lay down policies and standards of accounting and auditing. 3.To enforce and look after the compliance of the policies and standards of accounting and auditing. 4.To oversee the quality of service of professionals, including auditors, C hief Financial Officers (C FO), top-management officials, etc. 5.To suggest measures concerning improvement in the quality of service. Call 08045681010 / 8800999284

4. www.takshilalearning.com 6.To administer corporate or persons including auditors for any form of misconduct by auditors. or any member or firm. Related Articles Rights and Duties of Company Auditor CA Intermediate 2021- 2022 – FAQs Cash Flow Statement & Cash Equivalents How can I become a CMA after the 12th? Takshila learning one of the best educational portals for CA Online Classes & Chartered Accountant Course (C A C ourse)– C A Foundation, CA Intermediate & C A Final. Takshila Learning offers video lectures for CA Course as per the latest ICAI Syllabus by India’s best faculties. Our main objective is to support the aspirants to do their best and become successful C harted Accountants with all the necessary skills in place. Our mentors strive to get that perfection in the C A aspirants. Takshila learning helps you reach the highest position in the career as a C harted Accountant Prepare now for C MA Inter Exams with our CMA Inter Coaching online classes right from Here, at Takshila Learning, we offer C MA Foundation, CMA Inter, and CMA Final Video Lectures and C MA Foundation Pen drive Classes with CMA Foundation Study Material to help you in C MA Foundation Exam Preparation. Register with us today to become a Cost and Management Accountant! your home. Call 08045681010 / 8800999284