The Chartered Accountants Act, 1949 (Act) provides for imposition of penalties on members of the Institute of Charted Accountants of India (ICAI).

The ICAI had submitted a proposal to the Government for amendment to the Act to, inter alia, provide for registration of audit firms, procedure for taking necessary disciplinary action against audit firms (on the lines of such procedure for individual members) and imposition of penalties on audit firms. Section 132 of the Companies Act, 2013 provides for constitution of the National Financial Reporting Authority (NFRA) and sub- section (4) thereof confers powers on NFRA, for imposition of penalties on audit firms. This was stated by Shri P.P. Chaudhary, Minister of State for Corporate Affairs and Law & Justice in the Rajya Sabha today.

Regulatory authority power to impose penalties on audit firms follows firm registration and firm-level disciplinary procedures. The statutory framework is amended to vest a regulatory authority with power to impose penalties on audit firms, contingent on formal registration and subjecting firms to disciplinary procedures analogous to those for individual members, including investigation, proceedings, and sanctioning mechanisms.