Why in news?
Recently, Auditors of 1,000 large listed companies in India will have to file transparency reports with the National Financial Reporting Authority (NFRA) in the specified format, from the current financial year. It will also improve the credibility of auditors and boost the investor confidence in them.
- The NFRA is a legal watchdog for the auditing profession. The Punjab National Bank fraud prompted the government to establish an NFRA as the legal regulator for the auditing profession.
- The ICAI was mandated to keep an eye on erring auditors in the past.
- The NFRA was created due to this scandal and is now the governing body of the audit profession in India.
- NFRA is the government body responsible for setting accounting standards in the country.
- Its mandate is to improve the quality and consistency of financial statements in the country and ensure that businesses and financial institutions disclose accurate and fair information.
- The Companies Act requires the NFRA to have a chairperson who will be appointed by the Central Government and a maximum of 15 members. The appointment of such chairperson and members are subject to the following qualifications:
- They should be having an expertise in accountancy, auditing, finance or law.
- They are required to make a declaration to the Central Government that there is no conflict of interest or lack of independence in their appointment.
- All the members including the chairperson who are in full-time employment should not be associated with any audit firm (including related consultancy firms) during their term of office and 2 years after their term.