The National Financial Reporting Authority (NFRA), an independent regulator for the auditing profession, imposed ₹1 lakh fine on a chartered accountant (CA) for professional misconduct and debarred him from undertaking any auditing work for one year.
“This order will become effective after 30 days from the date of issue of this order,” the authority said in its June 21 order.
NFRA issued notice to the charted accountant (CA) on March 22 in respect of his professional misconduct as the statutory auditor of a Maharashtra-based steel firm for the financial year 2019-20, according to the order.
“This is the first such conviction after the constitution of NFRA,” an external spokesperson of the authority said. The National Financial Reporting Authority was constituted on October 1, 2018, by the Union government under the Companies Act, 2013.
The Union cabinet approved the establishment of NFRA on March 1, 2018, to set up an independent regulator for the auditing profession which is one of the key changes brought in by the Companies Act, 2013, a government spokesperson said.
“The decision is expected to result in improved foreign/domestic investments, enhancement of economic growth, supporting the globalisation of business by meeting international practices, and assist in further development of audit profession,” the official said.
According to the March 2018 cabinet decision, NFRA’s jurisdiction for investigation of chartered accountants (CAs) and their firms under section 132 of the Companies Act will extend to listed companies and large unlisted public companies.
“The central government can also refer such other entities for investigation where public
interest would be involved,” it said.
“The need for establishing NFRA has arisen on account of the need felt across various jurisdictions in the world, in the wake of accounting scams, to establish independent regulators, independent from those it regulates, for enforcement of auditing standards and ensuring the quality of audits to strengthen the independence of audit firms, quality of audits and, therefore, enhance investor and public confidence in financial disclosures of companies,” the statement issued by the Cabinet on March 1, 2018 said.