Following India’s biggest banking scam in the state-run lender Punjab National Bank, Corporate Affairs Minister Arun Jaitley’s new watchdog NFRA got approval from the Union Cabinet last week. Notably, NFRA will replace the existing National Advisory Committee on Accounting Standards (NACAS), which is an extension of another SRO ( Self-Regulatory Organisation) the ICAI. Finance Minister Arun Jaitley said that the new watchdog does not seek to interfere in the professional autonomy of the institute or its functioning. Further, according to the minister, NFRA will have a chairperson and appropriate number of members. “We will notify the rules that we have already made to allow NFRA to investigate matters of professional misconduct,” Arun Jaitley said in a press meet on Thursday. the ICAI (Institute of Chartered Accountants of India) will continue with routine matters and regulating private and public unlisted companies. So how will the NFRA’s role differ?
NFRA- an independent regulator
Finance Minister Arun Jaitley said that the NFRA will act as an independent regulator for the auditing profession, which was one of the key changes brought in by the Companies Act, 2013. Accordingly, NFRA would be an oversight body and look to monitor the functioning of auditors, and its jurisdiction would extend to all listed companies as well as large unlisted public companies. Further, the NFRA will also have the powers to investigate into matters relating to misconduct of any member or a firm of chartered accountants. Thus, it can issue summons, inspect books, registers and documents of any professional/firms probed and also impose penalties and detain members from a firm.
ICAI- regulate companies below a threshold, continue advisory role
Meanwhile, the ICAI will continue regulating private and public unlisted companies below a particular threshold, which is yet to be announced. Further, the ICAI will also continue with its advisory role on accounting and auditing standards.