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.

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.