National Financial Reporting Authority – ConstitutionAtul Khurana
Disclaimer: The views are personal and if it offends you then accept the reality because I am not writing any fascinating story.
NFRA Part 1: Click here to read
NFRA – Provisions:
When it comes to provisions of a certain thing, a section comes into light. Here it is the Section 132 of the companies Act, 2013.
Let us discuss it:
The section firstly justifies that the Central Government may by notification, constitute a National Financial Reporting Authority to provide for matters relating to accounting and auditing standards under this Act.
This section was a part of Companies Act since the day Act was notified but due to dispute between ICAI and Central Government, this particular section was put on hold.
Now, the Govt. has notified the provisions of this section which describes the constitution of NFRA and its powers.
The National Financial Reporting Authority shall consist of a chairperson, who shall be a person of eminence and having expertise in accountancy, auditing, finance or law to be appointed by the Central Government and such other members not exceeding fifteen consisting of part-time and full-time members as may be prescribed:
Provided that the terms and conditions and the manner of appointment of the chairperson and members shall be such as may be prescribed:
Provided further that the chairperson and members shall make a declaration to the Central Government in the prescribed form regarding no conflict of interest or lack of independence in respect of his or their appointment:
Provided also that the chairperson and members, who are in full-time employment with National Financial Reporting Authority shall not be associated with any audit firm (including related consultancy firms) during the course of their appointment and two years after ceasing to hold such appointment.
Here is an update on the appointed people:
The Chief and The Member:
Former IAS officer Rangachari Sridharan was appointed as first chief of National Financial Reporting Authority (NFRA), according to an official order.
Sridharan, a 1983 batch (retired) IAS officer of Karnataka cadre, will hold the post of chairperson, NFRA, for three years or till the incumbent attains the age of 65 years, the order said.
Besides him, Prasenjit Mukherjee has been appointed as full-time member of the authority for the same tenure, the order issued by Personnel Ministry said.
Mukherjee is a 1980 batch (retired) officer of Indian Audit and Accounts Service.
Something more interesting here: NFRA to hire Chartered Accountants
Yes, you read it right. MCA and NFRA is hiring Chartered Accountants for compliance related and other work and it is not strange anymore. One thing is very clear that there is no any qualification equivalent to Chartered Accountancy. Either a person is an IAS officer or he is a President of India or he is anybody else, till the time he is not a Chartered Accountant, The Law Compliance’s and Accounting Investigations are going to be a complicated issue for them and I am saying this because during my articleship I have seen the working of government departments and their respective MD’s (IAS officers), The position is prestigious but one should not forget that they too have limited knowledge. UPSC (IAS Exam) syllabus has coverage of almost all the topics that the syllabus of Indian schools and universities has in their entire curriculum but the coverage is not and cannot be in detail. Now some will say, they have experience too. So, let me tell you, An IAS officer do not have insights of detailed balance sheets and the frauds. There is one more position i.e. Indian Financial Services (IFS) officer for that.
So, the king may be an IAS officer but the force they need is tax, audit and law experts and more interestingly their hired CAs will certify the things with their knowledge which they have to accept. So, here the government is still a step behind from their motive and they will always be step behind till the time any other equivalent qualification will be notified by them.
Here is the invitation:
“The Ministry of Corporate Affairs (MCA) and National Financial Reporting Authority ( NFRA ) has invited applications from Chartered Accountants (CAs) based in Delhi/NCR having 2 to 5 years plus of post- qualification experience. The selected candidates will be engaged as Consultant in MCA offices/ RD Offices/ RoC Offices/ NFRA Offices in compliance, Investigation and inspection related areas of work.”
Now I can say that NFRA is the result of trust issues of the government. If they are hiring CAs for their work but by having their own Chief then instead of all this disputes they can nominate more members from government departments in the Disciplinary Board of ICAI. One thing I want to mention that the government has already nominated their members in the Board of ICAI and its various committees but may be now they also are not trustworthy for the Govt. The trust issues can never end. Today there is NFRA. Tomorrow will be NRA: NFRA Regulating Authority and things will go like this only. Seems funny but on one side when we feel that yes a body like NFRA is important, On the other side, the implementation is exactly similar to the implementation of GST that is the worst with no proper systems.
According to me, they should only regulate the examinations of ICAI and except that nothing was required but they moved in wrong order. Except the examinations they are interfering in each and every function of a body which is itself formed under the Act of the Parliament. One thing is clear, those who are studying it in detail and are updated they will understand that NFRA will be a compromise for sure. It will not implement in the way it is visible to us because they is long list of judicial pronouncements with ICAI in their favor.