The NFRA — the proposed auditor oversight body for listed and large unlisted companies — has certainly not gone off the Centre’s radar. It will be up and running before the end of September, a top government official said.
“Let me put all doubts to rest. NFRA will come and will come in the most effective manner,” said the official who did not wish to be identified.
The proposed National Financial Reporting Authority (NFRA), rules for which were notified in March-end, will hold more powers than its counterparts around the world, the official added. It will have a chairperson, three full-time members and nine part-time members, according to the rules notified by the Ministry of Corporate Affairs (MCA).
The NFRA will be an independent regulator overseeing the auditing profession, and its creation was first recommended by the Standing Committee on Finance in its 21st report.
Selection panel
“We are in the process of selecting the chairperson and members. It could take another two-three months,” the official said. The Centre will make the appointments based on the recommendation of a search-cum-selection panel headed by the Cabinet Secretary.
The chairperson should be an expert, and hold experience of not less than 25 years in the field of accountancy, auditing, finance or law. The term of office is three years or till he/she turns 65, whichever is earlier. He/she will be eligible for reappointment for one more term.
Full-time members should have at least 20 years’ experience in the field of accounting, auditing, finance or law.
Auditor exits
Asked about the spate of statutory auditor resignations in Corporate India in the recent months, the government official said the MCA is “alive to the issue” and that some action may be taken against any misconduct.
Since January this year, nearly 30 audit firms have reportedly resigned from various companies, citing reasons including auditee companies not sharing critical information with them for the purpose of audit.
Experts feel the existence of NFRA would have been useful in dealing with such as situation.
“If NFRA had been there, it would have looked into the current situation and taken remedial action,” Amarjit Chopra, Chairman, National Advisory Committee on Accounting Standards, told BusinessLine .
Last week saw Price Waterhouse Chartered Accountants LLP resign as statutory auditor of Atlanta Ltd.
Prior to that, Deloitte, Haskins & Sells had resigned as statutory auditor of Manpasand Beverages Ltd. Price Waterhouse had in April resigned as the statutory auditor of Vakrangee Ltd.
Meanwhile, the MCA is understood to have received about 15 complaints (under Company Law) from various auditors.
This is also being looked into separately, another government official said.