Auditing lapses are said to have led to the fraud involving billionaire jewellery designer Nirav Modi going undetected at the country's second largest bank ever since it started in 2011.
In a bid to strengthen the country's financial system in the wake of the Rs 12,700 crore PNB scam, the Union Cabinet on Thursday approved the setting up of an independent regulator — the National Financial Reporting Authority (NFRA) — for the Chartered Accountants.
Auditing lapses are said to have led to the fraud involving billionaire jewellery designer Nirav Modi going undetected at the country's second largest bank ever since it started in 2011.
The NFRA will have powers to investigate Chartered Accountants (CAs) and their firms under Section 132 of the Companies Act. This will extend to all listed companies and the large unlisted companies. The thresholds for the large companies will be prescribed in the rules. The government can also refer the entities for investigation where public interest would be involved.
The regulator will have a chairperson, three members and a secretary. It is likely to be notified in about two weeks.
"The NFRA will act as an independent regulator for the auditing profession and is one of the key changes brought in by the Companies Act, 2013," Finance and Corporate Affairs Minister Arun Jaitley said. "The NFRA would help in improving foreign and domestic investments. The decision to set up the regulator is in line with the international practices and will support the globalisation of business," he said.
"The NFRA will look at the accounting and auditing standards and will take action against those who are not complying with it," former Banking Secretary DK Mittal told DNA.
Currently, the Institute of Chartered Accountants of India (ICAI), the self-regulatory body of the CAs, is empowered to take action against them. This, experts say, can lead to conflict of interest.
Experts say that the move will take away review and disciplinary function of the ICAI in majority of the cases. The ICAI will now be left with powers over only small companies apart from its role in education and conducting exams, they add.
"NFRA is not meant to replace the disciplinary jurisdiction of the ICAI. Therefore, in all routine cases, which will be the bulk cases, the ICAI will perform its function," Jaitley said. ICAI is under the administrative control of the Ministry of Corporate Affairs.
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
 "Arun Jaitley")
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}