Background

The Companies Act, 2013 (2013 Act) empowered the Central Government (CG) to constitute a National Financial Reporting Authority (NFRA) to advise on matters relating to both accounting and auditing standards as well as for other issues relating to monitoring and compliance of such standards. Accordingly, the Ministry of Corporate Affairs (MCA) appointed 1 October 2018 as the date of constitution of the NFRA.

Additionally, on 24 October 2018, MCA notified certain sub-sections of the Section 132. These sub-sections lay down the roles to be performed by NFRA. The roles are as follows:

• Make recommendations to the CG on the formulation of accounting and auditing standards for adoption by companies, class of companies or their auditors
• Monitor and enforce compliance with both accounting and auditing standards
• Oversee the quality of service of the professions associated with ensuring compliance with such standards, suggest measures required for improvement in quality of service and such other related prescribed matters.

New development

On 13 November 2018, MCA notified the NFRA Rules, 2018 (the Rules) and these are effective from 14 November 2018. These Rules lay down the procedure for NFRA to monitor and enforce compliance with both accounting and auditing standards, oversee the quality of service and undertake investigation of the auditors of the companies and bodies corporates that are governed by NFRA.

This edition of First Notes contains a brief summary of the Rules.

To access the text of MCA notification please click here