Scope of NFRA
As was previously said, the NFRA has the authority to look into and evaluate the quality of work for a certain set of firms. Although the proposed NFRA Rules have not yet been adopted, if they were, the following class of businesses would be covered:
Companies listed in India
Unlisted Companies whose:
- Net worth ≥ ₹500 crore; or
- Paid up Capital ≥ ₹500 crore; or
- Annual turnover ≥ ₹1000 crore (As on 31st March of the preceding financial year); OR
- Companies whose securities are listed outside India
In addition, the NFRA has the authority to look into allegations of professional or other misconduct by a member or firm of Chartered Accountants or auditors against a specific class of corporate organizations or individuals (auditors). According to the draft NFRA standards, the following categories of organizations or their branches (including through the network/brand to which it belongs) are audited by auditors or audit firms, whether directly or indirectly:
- Audit of ≥ 200 companies in a year;
- Audit of ≥ 20 listed companies;
- Company or companies (whether listed or not), having:
- Net Worth ≥ ₹500 crores; or
- Paid up Capital ≥ ₹500 crores; or
- Annual turnover ≥ ₹1000 crores;(As on 31st March of the immediately preceding financial year); or
- Company or Companies listed outside India
Note: The following situations exempt corporations from the aforementioned restriction.
Either the NFRA chooses on its own to launch an inquiry in the public interest, or the Central Government or any regulator refers the NFRA to conduct such an investigation.
National Financial Reporting Authority(NFRA): Composition, Powers & Scope
Established according to Section 132 of the Companies Act 2013, the National Financial Reporting Authority (NFRA) is a body constituted under this act. This authority’s constitution came into force on October 1st, 2018. In this sense, the Central Government’s goal seems to be establishing a distinct, independent regulatory organization to support the creation and implementation of laws about accounting, auditing, and enhancing public and investor trust in an entity’s financial reporting. It is stated that the necessity for this authority developed in reaction to several recent business frauds.
Geeky Takeaways:
- Good accounting and auditing practices are essential to business governance.
- The National Financial Reporting Authority (NFRA) came into existence by Section 132 of the Companies Act 2013.
- The Central Government established the National Advisory Committee on Accounting Standards (NACAS) to guide the development and establishment of accounting standards and auditing procedures, as per Section 210A of the Companies Act, 1956.
- The National Financial Reporting Authority (NFRA) will take on the role of NACAS under the 2013 Companies Act.
- The National Financial Reporting Authority (NFRA) is a quasi-judicial organization that oversees many areas of accounting and auditing.
Table of Content
- What is NFRA?
- Why is NFRA Needed?
- Composition of NFRA
- Powers of NFRA
- Scope of NFRA
- Conclusion
- National Financial Reporting Authority(NFRA)- FAQs
Contact Us