National Financial Reporting Authority (NFRA)

• From the current fiscal year, auditors of 1,000 big Indian publicly traded businesses will need to submit transparency reports to the National Financial Reporting Authority (NFRA) in the required manner.
• It will raise investor confidence in auditors and enhance their credibility.

About NFRA:

• NFRA was established by the Indian government in 2018 in accordance with section 132 (1) of the Companies Act, 2013. It is a regulator of audits.
• Background: After the role of auditors and the Institute of Chartered Accountants of India came under scrutiny for alleged shortcomings in a number of corporate scandals, notably the one at the Punjab National Bank, the decision to establish the NFRA was made.
• Its members are a chairperson, who must be a distinguished individual with knowledge of accounting, auditing, finance, or law, chosen by the Central Government, and up to 15 additional members.

Duties and functions:

• It recommends that enterprises implement accounting and auditing procedures and standards for the Central Government's approval.
• Accounting and auditing standards compliance is monitored and enforced.
• Monitor the professionals responsible for making sure these criteria are followed and offer suggestions for ways to improve the quality of the services they provide.

Protect the public interest.

It has the following investigative authority over the following kind of organizations known as "public interest entities":

• Firms with securities listed on a stock exchange, whether inside or outside of India.
• Unlisted public enterprises with paid-up capital of at least Rs. 500 crore, annual revenue of at least Rs. 1,000 crore, or overall outstanding loans, debentures, and deposits of at least Rs. 500 crore as of March 31 of the previous fiscal year is eligible.
• Companies involved in the production or delivery of power, as well as insurance and financial firms.

If professional or other misconduct is established, it has the authority to issue an order for the imposition of:

• In the case of individuals, not less than one lakh rupees, but this amount may go up to five times the fees received; in the case of firms, not less than 10 lakh rupees, but this amount may go up to ten times the fees received.
• The India Comptroller and Auditor-General keeps an eye on its account.
• Its main office is in New Delhi.

National Financial Reporting Authority (NFRA)

• The National Financial Reporting Authority (NFRA) was constituted on 01st October 2018 by the Government of India under Sub Section (1) of section 132 of the Companies Act, 2013.

Functions and Duties

• Recommend accounting and auditing policies and standards to be adopted by companies for approval by the Central Government;
• Monitor and enforce compliance with accounting standards and auditing standards;
• Oversee the quality of service of the professions associated with ensuring compliance with such standards and suggest measures for improvement in the quality of service;
• Perform such other functions and duties as may be necessary or incidental to the aforesaid functions and duties.
• Authority shall protect the public interest and the interests of investors, creditors and others associated with the companies or bodies.

Companies and Bodies Corporate Governed by the Authority

1. Companies whose securities are listed on any stock exchange in India or outside India;
2. Unlisted public companies having paid-up capital of not less than rupees five hundred crores or having annual turnover of not less than rupees one thousand crores or having, in aggregate, outstanding loans, debentures and deposits of not less than rupees five hundred crores as on the 31st March of immediately preceding financial year;
3. Insurance companies, banking companies, companies engaged in the generation or supply of electricity, companies governed by any special Act for the time being in force or bodies corporate incorporated by an Act in accordance with clauses (b), (c), (d), (e) and (f) of sub-section (4) of section 1 of the Act;
4. Any body corporate or company or person, or any class of bodies corporate or companies or persons, on a reference made to the Authority by the Central Government in the public interest; and
5. A body corporate incorporated or registered outside India, which is a subsidiary or associate company of any company or body corporate incorporated or registered in India as referred to in clauses (a) to (d), if the income or net worth of such subsidiary or associate company exceeds twenty per cent. of the consolidated income or consolidated net worth of such company or the body corporate, as the case may be, referred to in clauses (a) to (d).