The approval for the appointment of former finance secretary Ajay Bhushan Pandey as the chairperson of the National Financial Reporting Authority (NFRA) has come by the Appointments Committee of the cupboard (ACC).
NFRA is a statutory body established in 2018 under the Businesses Act 2013. It is an independent regulatory body, which oversees the auditing profession, accounting standards and policies in India.
The authority recommends the formulation and laying down of accounting and auditing policies and standards for companies and their auditors. It also monitors and enforces compliance with accounting standards and auditing standards in such a manner as could also be prescribed.
NFRA also oversees the standard of service of the professions related to ensuring compliance with such standards and suggest measures required for improvement within the quality of service and such other related matters as is also prescribed.
NFRA was first proposed by the Commission on Finance in its 21st report, in the wake of the 2009 Satyam scandal. In 2018, the proposal to ascertain NFRA as an independent regulator was approved by the Union Cabinet.
The powers and duties of NFRA mentioned in Section 132 of Companies Act 2013 are to recommend accounting and auditing standards and guidelines in India, to undertake accounting investigations, and impose sanctions against auditors and audit firms for any violations. The sanctions are either within the variety of penalties or debarring from practice for up to 10 years.
NFRA Rules of 2018 expanded the powers of the authority to incorporate the governing of auditors of the subsequent entities:
- Companies listed in any exchange (within or outside India)
- Unlisted public companies above certain thresholds
- Any other companies laid out in Rule 3 (1) of NFRA Rules.
The main reason for establishing NFRA is to boost the transparency of economic statements presented by India’s listed companies and enormous unlisted companies.