Chartered Accountants (CAs), who sign balance sheets blindly (without proper checking), will be punished by NFRA (National Financial Reporting Authority), a new regulatory body to be set up soon. This body will essentially monitor the accounting and auditing standards and also take disciplinary action.
While the body is yet to take shape, Ministry of Corporate Affairs notified a set of rules and responsibilities for NFRA on November 14.
CAs who work with big firms will now have to follow the new set of rules, including time-bound detailed disciplinary proceedings. They also have to settle show cause notices within 90 days with a summary.
Not all CAs are happy with the time-bound disposal provision. One said that NFRA disciplinary proceedings could be misused. CAs are worried that the new set of rules will displace them from their comfort zone of ICAI, a self-regulatory body of Chartered Accountants (CAs). ICAI always has been under attack for its soft and delayed approach towards its accused CAs.
"ICAI has almost failed to take any disciplinary action against accused CAs who are involved in fraudulent activities and bypassed auditing rules. These will now come under NFRA," an official of Ministry of Corporate Affairs told DNA.
Government nominee on the council of ICAI and tax consultant, Ravi Gupta, said that honest CAs should not worry about the new set of rules. "Those performing their duties in a proper manner would not be impacted at all. Action will come into play only when fraud occurs since NFRA will have the power to initiate disciplinary proceedings."
Gupta further added that the only large firm audits will be covered under the new set of rules. "The other function will remain with ICAI."
Since 2011, ICAI has not come to terms with the idea of NFRA. ICAI thinks that NFRA is invading its domain.
According to the Ministry of Corporate Affairs, NFRA will maintain all the details of auditors appointed in companies and other bodies. The new regulatory agency will recommend accounting standards and auditing standards for approval by the government and also co-operate with national and international organisations.
Every auditor will file I-T returns with the Authority on or before April 30 of every year.
NFRA officials have the power to investigate any matter on the basis of its compliance or oversight activities. They can take suo moto call for an investigation into any case of professional or other misconduct. NFRA officials also have the right to summon company officials and its auditor for the explanation.
NFRA has been empowered to take action against the auditor or CAs of all listed, non-listed companies which have paid up capital more than Rs 500 crore, or its annual turnover is more than Rs 1,000 crore. If any company having, in aggregate, outstanding loans, debenture or deposit of more than Rs 500 crore, its accounting and auditing standards and quality of services will be under scanner of NFRA.
The new authority will not have any impact on students who are pursuing CA course. Former President of ICAI said, "NFRA will not affect CA students on any manner except that from examination point of view, they may be required to study Section 132 of Companies Act more carefully to understand role, responsibilities, constitution, and powers of NFRA."
CA STUDENTS NEED NOT WORRY
- Will not impact students studying to be Chartered Accountant (CA)
- Will maintain details of auditors appointed in companies and other bodies.
- Will recommend accounting standards and auditing standards for approval by the government.
- Will make sure that show cause notices are settled within 90 days with a summary
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