National Financial Reporting Authority – Intro & Criticism

National Financial Reporting Authority – Intro & Criticism

Disclaimer: The views are personal and if it offends you then accept the reality because I am not writing any fascinating story.

Introduction:

Though it is coming into limelight now but the term is not unknown to anyone if he/she is pursuing a career in Chartered Accountancy / Company Secretaryship / Cost Accountancy / LLB as an accounting or taxation consultant / UPSC or leading as a professional in the above mentioned fields.

Let’s recall it:

National Financial Reporting Authority (NFRA) is a government body set up under the provisions of The Companies Act, 2013 which main objective is to act as a regulator on the work of auditors of ICAI or to observe directly the transactions of prescribed companies (this is discussed in later para).

Need for a Regulator?

The Institute of Chartered Accountants of India (ICAI)  is an esteemed body set up under the Act of Parliament was the sole body which

  • Conducts the examination of Chartered Accountancy,
  • Gives the membership to students after passing those exams,
  • Bring the members on board as an auditors,
  • Check the work of auditors if circumstances warrant,
  • Punish the guilty in case of non-compliance of the prescribed rules and standards.

ICAI is working in this way since 1949 when it was formed and time to time it has set up various committees so as to keep an eye on the members of the institute so as to maintain the quality of the professionals.

The above mentioned process is still the same but in the last two steps government interfered and reason is still not so cleared.

When ICAI was regulating then why NFRA?

The Government of India works on the copy paste model and that is why while drafting the Companies Act, they had mentioned that there will be a authority which will set up the accounting and auditing standards in India. Now, don’t think that they were intelligent enough to predict everything. They had just copied what other nations were doing as they think that copying from others will give them full marks in the test of Indian Economy.

Ignoring the corruption that a single government department holds in our country which start right from Rs.100 to peon and ends up in paying lacks of rupees to different higher officials to  get a sign on a document, the government diverted these issues and shifted the focus of public on Chartered Accountants .2016- 2017 was the year when our Finance Minister Mr. Jaitley was targeting Chartered Accountants for everything without any investigation and the media was helping him because they were getting the spicy headlines.

Now the flavor was added by the Scams in which there was the involvement of auditing firms of India. Without going in any past scam, let me discuss the impact of PNB scam:

RBI i.e. The Reserve Bank of India which is a supreme authority that regulates the banking sector in India was sleeping after taking the sleeping pills for so long that they forgot to conduct the required audit of the concerned branch of PNB of Mumbai where the fraud has taken place. Now what about the public and what about the government? Mr. Jaitley without any investigation blamed the Chartered Accountants for non-observing the frauds which was later clarified by the auditors of the bank that they had pointed out the issues various times but the bank authorities didn’t take any action. (Click here to refer my detailed article on PNB Fraud)

The public was in anger, The BJP government was on point of Congress and other political parties. The mistake was committed was RBI but the officials were from BJP so they had to blame someone. As usual, Chartered Accountants were sacrificed.

Our Finance Minister Mr. Jaitley is a Lawyer by qualification and therefore No Regulatory Body other than Bar Council of India was imposed on Law Graduates. The honesty of lawyers is known to everyone. One should not forget, during a hearing of a criminal case, there are two lawyers: one from the side of innocent and one from the side of guilty and the one from the side of accused after taking huge money from his client manipulates he facts and evidences and save him from punishment and sometimes he can’t save his client.

  • Now what the Bar Council of India is doing?
  • How many lawyers got punished till date after their clients were declared as guilty?
  • Where is their code of conduct?

Okay let it be, but Why NFRA and Why not RRA i.e. RBI Regulating Authority? The mistake was committed by the bank officials and it was undetected due to the carelessness of RBI, so why no question was imposed on its integrity?

Our FM usually blames our auditors but why after having 2-3 Chartered Accountants in the BJP, A Law Graduate only forms the opinion on Chartered Accountants? He is a representative but he cannot say anything according to his will. CA. Suresh Prabhu and CA. Piyush Goyal were  All India Rank holders in CA examinations, How can they keep themselves quiet? Don’t they know that Auditors are not CBI officials to check each and everything in detail and that too with the limited powers of inspection and inquiry?

ICAI is a victim of politics. Can this government assure us that NFRA will detect a fraud in its initial stages?

It is a question and will remain so for ever. So without any choice we have to accept it as it may help the public to understand where the huge corruption resides. Time will disclose everything.

Now ending this part and tomorrow I will discuss the provisions of NFRA.

 – Atul Khurana

 

You can contact the author at Info@atulkhurana.com

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