Centre appoints ex-IAS officer as chairperson of National Financial Reporting Authority

NEW DELHI: The

Centre

has appointed former IAS officer

Rangachari Sridharan

as chairperson of the National Financial Reporting Authority (NFRA), an entity which will function as an independent regulator for the auditing profession.

Sridharan is a retired 1983 batch IAS officer of the Karnataka cadre. The appointments committee of the cabinet also approved the appointment of retired Indian Audit and Accounts Service officer of the 1980 batch, Prasenjit Mukherjee as a full-time member in NFRA. Both the appointments are for a period of three years or till the incumbent attains the age of 65 years, according to an official order.

The need for setting up the NFRA was triggered by the string of accounting scams and was approved by the Cabinet against the backdrop of auditors coming under the scanner for serious lapses in various corporate scandals including the Rs 13,000 crore Punjab National Bank fraud.

Policymakers felt that there was need to establish independent regulators, independent from those it regulates, for enforcement of auditing standards and ensuring quality of audits, strengthen the independence of audit firms, and boost investor and public confidence in financial disclosures of companies.

The Union Cabinet headed by Prime Minister Narendra Modi had approved on March 1 this year the proposal for setting up the NFRA and creation of one post of chairperson, three full-time members and one secretary for the new entity.

The decision to set up NFRA as an independent regulator for the auditing profession is in line with the changes brought in by the Companies Act, 2013. The inclusion of the provision in the Act was on the recommendations of the Parliament’s standing committee on finance in its 21st report.

Experts welcomed the appointment saying it will help in shaping the future of auditing.

“Delighted to hear that NFRA is being finally activated and that the audit profession is getting attention it deserves from all stakeholders. NFRA will play a key role in helping shape future of audit and through it efficient functions of capital and other financial markets in India,” said Vishesh C Chandiok, CEO, Grant Thornton India LLP

The jurisdiction of NFRA for investigation of chartered accountants and their firms under section 132 of the Act would extend to listed companies and large unlisted public companies, the thresholds for which shall be prescribed in the rules. The Centre can also refer such other entities for investigation where public interest is involved.

After the Cabinet decision, a government statement had said that the inherent regulatory role of ICAI (Institute of Chartered Accountants of India) as provided for in the chartered accountants act, 1949 shall continue in respect of its members in general and specifically with respect to audits pertaining to private limited companies, and public unlisted companies below the threshold limit to be notified in the rules.

The quality review board (QRB) will also continue quality audit of private limited companies, public unlisted companies below prescribed threshold and also audit of those companies that may be delegated to QRB by the NFRA. It had said that the ICAI shall continue to play its advisory role with respect to accounting and auditing standards and policies by making its recommendations to NFRA.