Composition of NFRA
The Companies Act mandates that the NFRA have a maximum of 15 members and a chairperson who shall be chosen by the Central Government. The following requirements must be met before such a chairman and members may be appointed:
During their term of office and for two years following it, all members, including the chairman, who are employed full-time, should refrain from having any affiliation with audit companies, including related consultant businesses.
Prescribed terms and conditions have not yet been established for the appointment of the chairman and members. Nonetheless, the following breakdown of the power is outlined in the draft NFRA rules:
- The chairperson is a distinguished individual with experience in accounting, auditing, finance, or law and is a chartered accountant;
- Member: Auditing; Member: Enforcement; Member: Accounting;
- One MCA delegate who has an ex-officio position comparable to that of joint secretary or higher
- The RBI will designate one representative to serve as a member of the RBI Board;
- SEBI shall designate one representative, who may be either the Chairman of SEBI or a full-time member;
- An individual who has served as a high court judge for more than five years or as a retired chief justice must be nominated by the Central Government. The ex-officio president of the Institute of Chartered Accountants of India.
Any additional individual may be invited to the meeting by the chairman to offer their professional judgment.
National Financial Reporting Authority(NFRA): Composition, Powers & Scope
Established according to Section 132 of the Companies Act 2013, the National Financial Reporting Authority (NFRA) is a body constituted under this act. This authority’s constitution came into force on October 1st, 2018. In this sense, the Central Government’s goal seems to be establishing a distinct, independent regulatory organization to support the creation and implementation of laws about accounting, auditing, and enhancing public and investor trust in an entity’s financial reporting. It is stated that the necessity for this authority developed in reaction to several recent business frauds.
Geeky Takeaways:
- Good accounting and auditing practices are essential to business governance.
- The National Financial Reporting Authority (NFRA) came into existence by Section 132 of the Companies Act 2013.
- The Central Government established the National Advisory Committee on Accounting Standards (NACAS) to guide the development and establishment of accounting standards and auditing procedures, as per Section 210A of the Companies Act, 1956.
- The National Financial Reporting Authority (NFRA) will take on the role of NACAS under the 2013 Companies Act.
- The National Financial Reporting Authority (NFRA) is a quasi-judicial organization that oversees many areas of accounting and auditing.
Table of Content
- What is NFRA?
- Why is NFRA Needed?
- Composition of NFRA
- Powers of NFRA
- Scope of NFRA
- Conclusion
- National Financial Reporting Authority(NFRA)- FAQs