The National Financial Reporting Authority (NFRA) is a body constituted under the provisions of Section 132 of the Companies Act, 2013. The constitution of this authority is effective from 1st October 2018.
Powers of the NFRA -
To investigate the matters of professional or other misconduct committed by a prescribed class of Companies act firms or Companies Acts. No other authority can initiate or continue proceedings where the NFRA has initiated an investigation. Such an investigation can be initiated either by itself or on a reference made by the Central Government.
The same powers as a Civil Court under the Code of Criminal Procedure, 1908, in respect of a suit involving the following matters.
Discovery and production of books of account and other documents, at such place and time as may be specified by the NFRA Summoning and enforcing the attendance of persons and examining them under oathInspection of any books, registers, and other documents of any person at any placeIssuing commissions for the examination of witnesses or documents
Where professional or other misconduct is proved, it shall have the power to impose the following punishment
For individuals a fine between Rs. 1,00,000 to 5 times the fees received;For firms a fine Between Rs. 5,00,000 to 10 times the fees received;
Debarring the member/firm from practice as a member of ICAI between 6 months to 10 years as may be decided.
Need for NFRA -
The requirement of NFRA was to strengthen the Financial System of India and to bring back the trust in Indian Auditors, which has been stained by recent events.The government has taken a decision to declare the NFRA immediate after the fraud of Punjab National Bank. This fraud has raised so many questions pertaining to the failure of internal and external auditors of the bank who ought to notice the guarantees being issued to Modi.The auditors failed to detect the fraud which was going on since 2011.This fraudulent case of Rs12,636 crore at PNB was the nal verge that pushed the government to approve NFRA.