The National Financial Reporting Authority (NFRA) will soon issue a circular outlining the frequently observed deviations in the preparation of financial statements and statutory audits to give guidance to managements and auditors on practices they should strictly avoid.
About National Financial Reporting Authority (NFRA)
- The NFRA was constituted on 01st October 2018, by the Government of India under the Companies Act, 2013.
- It is an independent regulator to oversee the auditing profession and accounting standards in India.
- Objective: To continuously improve the quality of all corporate financial reporting in India.
- 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;
- Composition: It consists 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.
- NFRA have the power to investigate, either suo moto or on a reference made to it by the Central Government into the matters of professional or other misconduct committed by any member or firm of chartered accountants registered under the Chartered Accountants Act, 1949.
- It has the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 while trying a suit.
- HQ: New Delhi
Q1) What is Auditing?
Auditing is a systematic and independent examination of financial information, statements, records, operations, or processes to determine their accuracy, completeness, compliance with relevant laws and regulations, and overall reliability. The primary purpose of an audit is to provide assurance to stakeholders, such as shareholders, investors, regulators, and the public, that the information being audited is free from material misstatements and is presented fairly.