News Excerpt:
National Financial Reporting Authority (NFRA) pointed to gaps and inadequacies in procedures followed and documentation of statutory audits done by top audit firms.
About the news:
- The National Financial Reporting Authority (NFRA) issued its report stating that the firms violated Sections 144 and 141 of the Companies Act, 2013.
- These sections deal with prohibited services and eligibility of auditors.
- The observations are not disciplinary in nature, but an opportunity for the auditors to improve their systems and procedures.
Statutory Audit:
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About NFRA:
- It was constituted in 2018 by the Government of India under Sub Section (1) of section 132 of the Companies Act, 2013.
- Functions and Duties:
- Recommend accounting and auditing policies and standards to be adopted by companies for approval by the Central Government;
- Monitor and enforce compliance with accounting standards and auditing standards;
- Oversee the quality of service of the professions associated with ensuring compliance with such standards and suggest measures for improvement in the quality of service;
- Perform such other functions and duties as may be necessary or incidental to the aforesaid functions and duties.
- Companies and Bodies Corporate Governed by the Authority:
- Companies whose securities are listed on any stock exchange in India or outside India;
- Unlisted public companies having -
- paid-up capital of not less than rupees five hundred crores or
- annual turnover of not less than rupees one thousand crores or
- having, in aggregate, outstanding loans, debentures and deposits of not less than rupees five hundred crores as on the 31st March of immediately preceding financial year;
- Insurance companies, banking companies, companies engaged in the generation or supply of electricity, companies governed by any special Act.
- Any body corporate or company or person, or any class of bodies corporate or companies or persons, on a reference made to the Authority by the Central Government in public interest.
- A body corporate incorporated or registered outside India, which is a subsidiary or associate company of any company.