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National Financial Reporting Authority Rules’ 2018 (NFRA)

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Central Government has notified National Financial Reporting Authority Rules’ 2018 dated 13/11/2018 and shall come into force on the date of their publication in the official Gazette. Such Authority shall have power to monitor and enforce compliance with accounting standards and auditing standards, oversee the quality of service or undertake investigation of the auditors of the class of companies and bodies corporate prescribed.

 

Following are the features and compliance to be followed by the prescribed companies-

  • Applicability of NFRA Rules, 2018:
  1. All Listed Companies/ Body Corporates; or
  2. Unlisted Companies with Paid up Capital or Loans > = INR 500 crores OR Turnover > = INR 1000 crores; or
  3. ALL Banks/Insurance/Electricity Companies; or
  4. Any company / body corporate on a reference made to the authority by the central government in public interest
  5. Certain specific foreign Subsidiaries/Associates of Indian Companies

 

  • Filing of Forms with NFRA by companies prescribed:
  • Inform the Authority within 30 days of the commencement of these rules in Form NFRA-1, the particulars of the auditor as on the date of commencement of these rules.
  • Inform the Authority within 15 days of appointment in Form NFRA-1, the particulars of the auditor.

 

  • Company / auditor once governed by NFRA will be covered by NFRA for 3 more years after it ceases to be listed or its paid-up capital or turnover or aggregate of loans, debentures and deposits falls below the limit stated therein.

 

  • Filing of Forms with NFRA by auditors:
  • Auditor of these Companies required to file ANNUAL RETURN to NFRA on or before 30th April every year in such form as may be specified by the Central Monitoring and enforcing compliance with accounting standards.

 

  • For auditor of these Companies, ICAI do not have any investigation role.

 

  Powers and Responsibilities of NFRA

  • Maintain details of particulars of auditors appointed in the companies and bodies corporate.
  • Notifying accounting standards and auditing standards for approval by the Central Government
  • Monitor and enforce Compliance with accounting standards

o   NFRA may review the financial statements of such company or body corporate, as the case may be, and if so required, direct such company or body corporate or its auditor by a written notice, to provide further information or explanation or any relevant documents relating to such company or body corporate.

o   NFRA may require the personal presence of the officers of the company or body corporate and its auditor for seeking additional information or explanation.

o   Where the Authority finds or has reason to believe that any accounting standard has or may have been violated, it may decide on the further course of investigation or enforcement action through its concerned Division.

o   The Authority shall publish its findings relating to non-compliances on its website

 

  • Monitor and enforce Compliance with auditing standards

o   The Authority may review working papers (including audit plan and other audit documents) and communications related to the audit. It may evaluate the sufficiency of the quality control system and perform such other testing of the audit, supervisory, and quality control procedures of the auditor as may be considered necessary or appropriate.

o   The Authority may require an auditor to report on its governance practices and internal processes designed to promote audit quality, protect its reputation and reduce risks including risk of failure of the auditor and may take such action on the report as may be necessary.

o   The Authority may seek additional information or may require the personal presence of the auditor for seeking additional information or explanation in connection with the conduct of an audit.

o   The Authority shall also oversee the quality of service and suggesting measures for improvement.

 

  Powers under Section 132 of the Companies Act, 2013

  • Monitoring and Regulating Powers
  • Investigating and Summoning Powers – Investigation of audit firms, summoning and enforcing attendance, Inspection of records.
  • Penalizing Powers – Individual Auditors (INR 1 Lakh to 5 times of Fees), Firm of Auditors (INR 5 Lakhs to 10 times of Fees).
  • Debarring Powers – Debarring from Practice as a member of ICAI for a period of 6 months to 10 years.

 

Implementation Guide on Resignation/ Withdrawal from an Engagement to Perform Audit of Financial Statements issued by the Auditing and Assurance Standards Board

 

https://resource.cdn.icai.org/52929aasbicai-igr.pdf

Exposure Draft Guidance Note on Audit of Banks Audit

–          Statutory Central Audit-

https://resource.cdn.icai.org/52605aasb42162.pdf

–          Bank Branch Audit other than Foreign Exchange Transactions –

https://resource.cdn.icai.org/52613aasb42168.pdf

–          Foreign Exchange Transactions and Integrated Treasury –

https://resource.cdn.icai.org/52607aasb42164.pdf

Revised Implementation Guide to SA 230, “Audit Documentation” issued by the Auditing and Assurance Standards Board

https://resource.cdn.icai.org/52985aasb42474.pdf

 

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