India approved the draft rules for establishing a new body to oversee auditing and accounting standards in India.
The National Financial Reporting Authority will comprise a chairman and up to 15 members, and will cover listed and large unlisted companies.
Finance Minister Arun Jaitley said in a media briefing.
The existing self-regulatory body, Institute of Chartered Accountants in India, will continue to govern the auditing of other smaller companies.
The Existing ICAI Powers Limited to Smaller Companies.
All Large Listed and Unlisted Companies Will take Care by National Financial Reporting Authority.
*Cabinet approves setting up of NFRA*
The union Cabinet today approved the regulatory authority for chartered accountants, the National Financial Regulatory Authority ( NFRA ).
Finance Miister Arun Jaitely, while addressing the media today confirmed the same. The provision will initially apply to all listed companies and unlisted large companies.
For others, the existing disciplinary mechanism under the Institute of Chartered Accountants of India (ICAI) will continue. Amended rules in this regard will notify later, Jaitley said.
The authority will consist of 15 members, he added. Section 132 of the Companies Act, 2013 provides for establishment of National Financial Reporting Authority. However, the provision has not been notified yet.
Under the provisions of the Companies Act, 1956, the Centre was to prescribe accounting standards prepared by ICAI in consultation with the National Advisory Committee on Accounting Standards (NACAS).
Such powers are to be transferred to NFRA under the 2013 Act. Consequently, NFRA would have taken away several powers that are currently vested with ICAI.
There were rumors that several chartered accountants had successfully lobbied with the government to block the notification.
The issue had been on the backburner for the last few years but is now simmering again after Prime Minister Narendra Modi publicly aired his criticism over ICAI’s disciplinary record -a charge that the institute is now trying to cope with.
At the CA Day event on July 1, Modi had said that just around 25 auditors had faced action in over a decade and around 1,400 cases were pending. ICAI is expected to fix the issue shortly, but that has not stopped the government from reopening the case for NFRA.
The law provides for NFRA to look into matters of professional or other misconduct and also suspend CAs and firms from practising for six months to 10 years.
This also comes at a time when ICAI is pushing to revise joint audit of Indian companies after its plea for a mechanism was rejected by a committee headed by former Competition Commission of India chairman Ashok Chawla in a report to the Prime Minister’s Office.
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