The Union Cabinet approved the foundation of the National Financial Reporting Authority on 1st March 2018. It is an independent body regulating audit and accounting standards under Section 132 of “Companies Act, 2013”.

If you want to know more about what NFRA is and its objectives and powers, keep reading.

The prime objectives of the National Financial Reporting Authority of India are as follows:

• Fabricate specific Central Government Legislations of audits and accounting rules and regulations that auditors and companies can follow.
• Enforce and supervise those standards and policies over auditor’s work.
• Ensure services of all concerned professions are correspondent with these regulations and policies.
• Improve the quality of financial reporting of all companies in India.

The Central Government will appoint a chairperson and 15 members who will have the below qualifications:

• They must be connoisseurs in finance, accounting, audit and law.
• No members can be associated with any other audit or consultancy firm during their term of appointment.
• Similarly, they cannot join any such firm after 2 years of their terms of office.
• They must declare the compatibility and independence in the office to the Central Government.

Followings are certain powers of the National Financial Reporting Authority -

• It can investigate any misconduct or professional matter performed by a Chartered Accountant or CA firm.
• NFRA has a similar power as a Civil Court under the Code of Criminal Procedure, 1908 to resolve the following lawsuits:

Inspect any accounting firm’s documents, registers, or books.

Summon individuals and scrutinise them under oath.

Penalise any professionals of a CA firm up to their disqualification.

If an individual or a firm is subjected to the following penalties in case of any misconduct:

• Over ₹ 1 lakh and up to 5 times the fees received for an individual.
• More than ₹ 10 lakh and 10 times the received fees for a firm.
• Disqualifying a CA or a CA firm between 6 months to 10 years from practice as an ICAI member.

The constitution of the National Financial Reporting Authority makes India an eligible member of the International Forum of Independent Audit Regulators. However, it does not intervene in the advisory role of the Institute of Chartered Accountants in India.