The Central Government, by notification, constituted the National Financial Reporting Authority (NFRA) under the provisions of Companies Act,2013 for matters relating to accounting and auditing standards. So as to improve the confidence of investors and the public in the financial reporting of the entity.
Functions of NFRA
The functions of NFRA are as follows:
- One of the functions of NFRA is to make recommendations to the central government on the formulation and laying down of accounting and auditing policies and standards for adoption by companies or the class of companies or their auditors, as depends on the case.
- Another function of the NFRA is to monitor and enforce compliance with accounting standards and auditing standards in such a manner as may be given in law.
- Oversee the quality of service of the professionals associated with ensuring compliance with such standards, and suggest measures required for improvement in the quality of service and other related matters.
Powers of NFRA
The powers given to NFRA are as follows:
- NFRA has the power to investigate matters of professional or other misconduct. National financial reporting authority shall have the power to investigate, either by himself or on a reference made to it by the central government for such class of bodies corporate or persons. The investigation into the matters of professional or other misconduct committed by any member of the firm of chartered accountants.
- National financial reporting authority shall have the same powers which are with the Civil Court in respect of certain matters like discovery and production of books of account and other documents which they seek necessary, at such place and time as may be specified by them, summoning and enforcing the attendance of persons and examining them under oath, etc.
- National financial reporting authorities have the power to impose a penalty. Where professional or other misconduct is proved that National financial reporting authority shall have the power to make an order for:
- An imposing penalty of not less than Rs.1,00,000 but which may extend to 5 times of the fees received in case of individuals, and not less than Rs.5,00,000 but may extend to 10 times of the fees received by the firms.
- Debarring the member of the firm who is proved for professional or other misconduct from being appointed as an auditor or internal auditor or undertaking any audit in respect of financial statement or internal audit of the functions and activities of any company or body corporate or performing any valuation for a minimum of 6 months hire. 10 years may be determined by the national financial reporting authority.