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Headed by the Prime Minister, Union Cabinet has cleared the proposal for setting up of National Financial Reporting Authority (NFRA). It has sent the shocking signal for the professionals & members of ICAI. With ICAI having its own disciplinary mechanism & have branded the CA as a profession of respect & dignity, need for NFRA is questioned by all the professionals.
What is NFRA?
- The original concept of National Financial Reporting Authority (NFRA) was conceptualized u/s 132 in the Companies Act, 2013. It was correctly kept on hold earlier after due representation by ICAI & others. However recent fraud in PNB, Supreme Court pronouncement over Big 4 etc has triggered it back. A Government is all set to regulate the Accountancy Profession by a new regulator in the form of NFRA.
- The jurisdiction of NFRA is to cover the auditors of all listed companies & other large sized public companies as may be prescribed in the rules. It would further be delegated with the power to carry out investigation of other entities where public interest is involved meaning that every company, society, banks, large borrowers would be in the net of NFRA. It appers that the powers of ICAI would be restricted to other cases which are outside the NFRA net.
- NFRA is empowered to debar casual & erring auditor or auditing firm for a period of 10 years in addition to imposing heavy penalty.
- NFRA will consist of 15 members, one as a chair person and 3 full-time members.
- PM in his statement at annual function has itself placed a question mark over the disciplinary mechanism of ICAI.
- Records shows says that penalty for a period of one year or more have been imposed in 14 cases only and in vast majority of the cases, the members have been not found guilty. In some cases, though members have been found guilty they have been condoned by just a caution or with few words of wisdom.
- NITI Ayog & other Government agencies has criticized self-regulatory structure of the professional bodies.
- It is further augmented by the comment by one international consultant engaged by SEBI said “the ICAI’s oversight is passive in nature and with limited focus on active investigations”.
- Government believes that watchdog over CA would ensure better control in the system. It is said that in 51 countries, there is a regulatory over the professionals.
- The proposal of ICAI having its own disciplinary mechanism was totally ignored by the Government for setting up NFRA.
POWERS OF THE NFRA:
The National Financial Reporting Authority shall
(a) have the power to investigate, either suo motu or on a reference made to it by the Central Government, for such class of bodies corporate or persons, in such manner as may be prescribed into the matters of professional or other misconduct committed by any member or firm of chartered accountants, registered under the Chartered Accountants Act, 1949:
Provided that no other institute or body shall initiate or continue any proceedings in such matters of misconduct where the National Financial Reporting Authority has initiated an investigation under this section;
(b) have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in respect of the following matters, namely:—
(i) Discovery and production of books of account and other documents, at such place and at such time as may be specified by the National Financial Reporting Authority;
(ii) Summoning and enforcing the attendance of persons and examining them on oath;
(iii) Inspection of any books, registers and other documents of any person referred to in clause (b) at any place;
(iv) Issuing commissions for examination of witnesses or documents;
PUNISHMENTS & PENALTIES:
Where professional or other misconduct is proved against any member or firm, NFRA shall have the power to make order for—
(a) Imposing penalty of—
(i) Not less than one lakh rupees, but which may extend to five times of the fees received, in case of individuals; and
(ii) Not less than ten lakh rupees, but which may extend. To ten times of the fees received, in case of firms;
(b) debarring the member or the firm from engaging himself or itself from practice as member of the Institute of Chartered Accountant of India referred to in clause (e) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 for a minimum period of six months or for such higher period not exceeding ten years as may be decided by the National Financial Reporting Authority.
(Reference is made to CA Act for knowing the meaning of Professionals or other misconduct)
Why so much question Mark?
Toughest exams, World class education, Rigorous Training, Untiring effort is what enables person to prefix alphabets “CA” before their name.
World over, Indian Chartered Accounts are considered as the best brain in the Accountancy profession. However, the recent remarks & comments have made everything look doubtful & questionable.
Be it BJP or Congress, CA’s are treated alike. Always ignored & least appreciated. Present statement, comments & remarks over CA are not sudden but could have been visualized well in advance by the remarks of the politicians & bureaucrats over the professionals.
It is worthwhile here just to make a small comments over the so called politicians who are even not able to visualize & ensure proper administration of GST in the country, to say the least.
CA’s are an easy target to blame for anything & everything.
CA is a profession of dignity and respect. All over, they have delivered their best for the betterment of the county. The professionals believe themselves as a “Partner in Nation Building”. However, it appears that Government doesn’t think so.
Nothing happens overnight. Hon’ble Prime Minister comment over CA during the demonetization period. CA Piyush Goyal remarks in the recent function has probably given enough signal for the professionals.
Though already late, this is a time for ICAI to be harder in conveying to Government. That such adverse remarks cannot be accepted. Nor in present circumstances nor in future. Let us maintain the arm’s length distance while addressing the issue.