CONSTITUTION AND DUTIES OF NFRA
National Financial Reporting Authority (“NFRA”) was constituted by Government of India on October 1, 2018, in terms with sub-section 1 of Section 132 of the Companies Act, 2013 (“Act”), which mentions the constitution of NFRA to provide for matters relating to accounting and auditing standards under the Act.
As per subsection 2 of Section 132 of the Act, the duties of NFRA are as follows:
- 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.
RULES APPLICABLE
Ministry of Corporate Affairs (MCA), had amended the National Financial Reporting Authority Rules, 2018, with as National Financial Reporting Authority (Amendment) Rules, 2019 (together referred as “Rules”)
CLASSES OF COMPANIES AND BODIES CORPORATE GOVERNED BY NFRA
As per Rule 3 of the aforesaid Rules, the Authority shall have the power to monitor and enforce compliance with accounting standards and auditing standards, oversee the quality of service under sub-section (2) of section 132 or undertake an investigation under sub-section (4) of such section of the auditors of the following class of companies and bodies corporate, namely:-
(a) Companies whose securities are listed on any stock exchange in India or outside India;
(b) Unlisted public companies
- having paid-up capital of not less than Rs. 500 crores; or
- having an annual turnover of not less than Rs. 1000 crores; or
- having, in aggregate, outstanding loans, debentures and deposits of not less than Rs. 500 crores as on the 31st March of immediately preceding financial year;
(c) Insurance companies, banking companies, companies engaged in the generation or supply of electricity, companies governed by any special Act for the time being in force or bodies corporate incorporated by an Act in
(d) 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 the public interest; and
(e) A body corporate incorporated or registered outside India, which is a subsidiary or associate company of any company or body corporate incorporated or registered in India as referred to in clauses (a) to (d), if the income or net worth of such subsidiary or associate company exceeds 20 % of the consolidated income or consolidated net worth of such company or the body corporate, as the case may be, referred to in clauses (a) to (d).
Deadline of Filing NFRA Annual Return:
As per Rule 5, Every auditor referred to in rule 3 shall file a return with the Authority on or before 30th November every year in Form NFRA-2.
Prerequisites for NFRA 2 Form
- LLPIN or any other registration Number of the firm
- PAN of Auditor (for Indian firm)
- Registration number of Auditor with the regulator/agency
- The following details of the companies that need to be filled in:
- Name of Company/Body Corporate
- CIN / PAN of Company /Body Corporate or FCRN of the company or Identity number of body corporate
- Global Location Number of Company/Body Corporate (if applicable)
- Details of the Fees received by the Auditor from Company/Body Corporate
- Currency Conversion rate (if fees received in Foreign Currency)
- Network Registration Number of the auditor with ICAI
- Details of the Partners of the auditor
- Number of employees employed by the auditor
- Digital Signature Certificate (DSC) of User
Penalty for non-compliance
The common provision of Section 450 of the Act has been specified in Rule, 13 of NFRA, 2018 for such non-compliances of NFRA Rules, 2018.
Where Section. 450 of the Act provides for fine which may extend to Rs. 10,000/-, and where the contravention is continuing one, with a further fine which may extend to Rs. 1000/- per day during which the contravention continues.
FAQ’s for NFRA can be referred at link : NFRA 2 Form FAQ.pdf
Steps for filing NFRA-2 can be referred at link: NFRA 2_ Instructions For Filling the Form_v 1.pdf (eformnfra2.nic.in)
Technical queries can be registered at the mentioned website of NFRA – National Financial Reporting Authority (NFRA) (eformnfra2.nic.in)
