The Companies Act, 2013 — Section 132 — Constitution of National Financial Reporting Authority (NFRA)

The Stand­ing Com­mit­tee on Finance (2014–15), Six­teenth Lok Sab­ha in its thir­teenth report on Demands of Grants (2015–16) of Min­istry of Cor­po­rate Affairs has inter alia made fol­low­ing observation/ rec­om­men­da­tion in the para 81:

“The Com­mit­tee note that Nation­al Financ­ing Reg­u­la­to­ry Author­i­ty (NFRA) has been set up as an over­sight body hav­ing qua­si-judi­cial author­i­ty includ­ing suo moto inves­ti­ga­tion pow­ers in cas­es of pro­fes­sion­al mis­con­duct by a Char­tered Accountant/firm of Char­tered Accoun­tants, impo­si­tion of penal­ty there­of, debar­ring mem­bers of the Insti­tute of Char­tered Accoun­tant of India (ICAI), if proved guilty, etc. The Com­mit­tee fur­ther note that the con­sti­tu­tion of NFRA is a result of the rec­om­men­da­tion of the Stand­ing Com­mit­tee on Finance which exam­ined the Com­pa­nies Bill, 2009 and rec­om­mend­ed that the scope of the Nation­al Advi­so­ry Com­mit­tee on Account­ing Stan­dards (NACAS) as includ­ed in the Com­pa­nies Act, 1956 should be expand­ed not only to set and over­see audit­ing and account­ing stan­dards, but also to mon­i­tor the qual­i­ty of audit under­tak­en across the cor­po­rate sec­tor. The Com­mit­tee fur­ther observe that sim­i­lar over­sight bod­ies also exist in oth­er coun­tries, for exam­ple, Finan­cial Ser­vices Author­i­ty (FSA) in Unit­ed King­dom and Pub­lic Com­pa­ny Account­ing Over­sight Board (PCAOB) in Unit­ed States of Amer­i­ca. How­ev­er, as issues relat­ing to con­flict of man­date with regard to dis­ci­pli­nary mat­ters between the NFRA and the Act gov­ern­ing the Insti­tute of Chart­ed Accoun­tants of India has been raised, the Com­mit­tee desire that the Min­istry may ensure that in the process of con­sti­tut­ing NFRA, it does not cre­ate two par­al­lel juris­dic­tions, gov­ern­ing the same issue. The Com­mit­tee would like the NFRA to func­tion as an over­sight body with­out any juris­dic­tion­al con­flict or over­lap. This aspect may be addressed, when the rules gov­ern­ing NFRA are finalised by the Ministry.”

Com­plete report is host­ed at: http://164.100.47.134/lsscommittee/Finance/16_Finance_13.pdf