New Delhi, October 12 The Corporate Affairs Ministry ( MCA) has constituted a search-cum-selection committee for recommending names for appointment of Chairperson and full time members in the National Financial Reporting Authority (NFRA), which is the country's independent audit regulator.

This panel — to be chaired by the Cabinet Secretary — was set up early this month and has been given four months time to make its recommendations, sources close to the development said.

The panel

The other members of this high powered committee include Principal Secretary to the Prime Minister, MCA Secretary, SEBI Chairman Ajay Tyagi, Gift City regulator IFSCA Chairman Injeti Srinivas besides P C Jain, former Principal of Shri Ram College of Commerce in Delhi University.

It maybe recalled that the first NFRA chairperson Rangachari Sridharan had demitted office on September 30 after a three-year stint at the helm of this regulatory body.

The government had recently given Competition Commission Chairman Ashok Kumar Gupta additional charge as the Chairman of NFRA for three months with effect from October 1.

It is learnt that over 70 persons had already applied for the post of NFRA Chairman.

NFRA and the CA Institute are not on the same page as regards several issues affecting the functioning of the audit profession in India.

NFRA vs ICAI

The law has clearly demarcated the roles of both NFRA and ICAI as regards oversight on audit fraternity. While NFRA has been tasked to oversee auditor performance of listed companies and large private companies, the ICAI will have to supervise audit performance of unlisted companies that are below a particular threshold (basically smaller unlisted companies).

However, the ground reality is different with NFRA coming in for some criticism for regulatory overreach. NFRA had recently without consulting its Board come out with a consultation paper that among other things sought to know as to whether small and medium businesses should be exempted from mandatory statutory audit or not given the increased compliance burden they faced.

The CA Institute contends that NFRA had no legal powers to look into issues such as whether audit is required or not for certain segments of the society.

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