TaxTMI 
TaxTMI 
TaxTMI 
Co Author: Nikita Agarwa, ACA, ACS
Issue on Accounting and Auditing Standards
The Central Government may prescribe the standards of accounting or any addendum thereto, as recommended by the Institute of Chartered Accountants of India, constituted under section 3 of Chartered Accountants Act, 1949, in consultation with and after examination of the recommendations made by the National Financial Reporting Authority. [Section 133].
The Central Government may also prescribe the standards of auditing or any addendum thereto, as recommended by the Institute of Chartered Accountants of India, constituted under section 3 of the Chartered Accountants Act, 1949, in consultation with and after examination of the recommendations made by the National Financial Reporting Authority. [Sub - section (10) of Section 143]
The Central Government, in consultation with the National Financial Reporting Authority, in respect of such class or description of companies, may direct, as may be specified in the order that the auditor’s report shall also include a statement on such matters as may be specified there. [Sub- section (11) of Section 143]
Thus, National Financial Reporting Authority shall give its recommendations on accounting standards and auditing standards. Accounting to Section 132, NFRA shall only recommend and it is the Central Government who shall prescribe such standards.
Jurisdiction, Powers of and Imposition of Penalties by NFRA
The National Financial Reporting Authority shall have jurisdiction over bodies corporate and persons for matters of professional and other misconduct committee, by any member or firm of Chartered Accountants registered under the Chartered Accountants Act, 1949. No other institute or body (including professional institutes) shall initiate or continue any proceeding in such matters of misconduct where the authority has initiated an investigation under this section.
The Authority shall have powers as are vested in a civil court under Code of Civil Procedure in respect of following matters:
a) Discovery and production of books of accounts and other documents
b) Summoning and enforcing the attendance of persons and examining them on oath
c) Inspection of any books, registers and other documents of any person
d) Issuing commission for examination of witness or documents.
Sub Section (4) is a non-obstante clause, providing a bar on anybody or any institute, in initiating or continuing the proceedings in matters relating to misconduct as referred to in Chartered Accountants Act 1949.
The Authority shall have powers to make an order in relation to :
1. Imposing penalty of
(i) not less than one lakh rupees which may extend to five times of the fees received in case of individuals and
(ii) not less than ten lakh rupees which may extend to ten times of the fees received in case of firms
2. Debarring member or the firm from engaging himself or itself from practice for a period of six months to ten years.
Appeals and Appellate Authority
Any person aggrieved by any order of the National Financial Reporting Authority may prefer appeal to Appellate Authority, set up for this purpose.
The Appellate Authority shall consist of a chairperson and not more than two members. However, the Appellate Tribunal constituted under the Chartered Accountant Act, 1949 will not act as Appellate Tribunal under this clause.
Relevant Rules
The following Rules shall be prescribed separately, after enactment of Companies Act, 2012 -
- Composition of NFRA
- Manner in which NFRA shall monitor and enforce the compliance with accounting standard and auditing standards recommended by it.
- Matters related to overseeing and suggesting measures regarding the compliance of Accounting Standards may be prescribed.
- Other functions which the NFRA is required to perform.
- Terms and conditions of appointment of the chairperson and members of NFRA.
- Form of declaration, to be given by Chairperson and member, regarding no conflict of interest or lack of independence to Central Government.
- Manner of investigation of Body Corporates, by NFRA, may be prescribed.
- Professions, which can be investigated by NFRA against professional misconduct.
- Manner in which right to appeal may be exercised by an aggrieved person against any order of NFRA, before the Appellate Tribunal.
- Fees for filing the appeal.
- Manner in which NFRA shall have meetings and observe rules of procedure, in regard to the transaction of business, at its meetings.
- Terms of appointment of Secretary and other employees, appointed by Central Government.
- Form and manner in which NFRA shall maintain books of account and other books in relation to its accounts, to be prescribed by Central Government in consultation with CAG.
- Form and time, for the annual report of the NFRA .