National Financial Reporting Authority forms panel for fine-tuning audit standards

National Financial Reporting Authority forms panel for fine-tuning audit standards

The National Financial Reporting Authority (NFRA), the agency tasked with regulating auditors, has formed a technical advisory committee (TAC), which will not only advise it on accounting and auditing standards, but also how to improve the drafting of audit quality review reports (AQRRs).

NFRA rules allow the regulator to constitute advisory committees, study groups and task forces for the effective performance of its roles and responsibilities.

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A senior government official said, “NFRA’s main function is protecting public interest and with this view, it was felt strongly for the need to set up an advisory committee which will review and provide views and concerns on various aspects of corporate financial statements.”

The seven-member panel, which will be chaired by IIM Bangalore professor R Narayanaswamy, includes Titan CFO S Subramaniam, CFO of Infosys Consulting Group Gargi Ray and Anantha Narayan, former head of equity research at Credit Suisse and Morgan Stanley.

The terms of reference of TAC includes aiding and advising NFRA’s executive body (EB) on issues relating to drafts of accounting and auditing standards. They would also advise the regulator on improvement in the processes relating to drafting of AQRRs.

The panel will also provide inputs on the perspective of users, preparers and auditors of corporate financial statements. It will also suggest suitable measures for promoting awareness relating to accounting and auditing compliance and on the role of NFRA in protecting investors through independent auditor regulation.

The role is of part time nature and the term of the committee will be for a period of one year from the day it holds its first meeting or as decided by the NFRA chairman. The panel will submit its recommendations to the NFRA chairman. The TAC can invite or seek opinion of any expert relating to any matter.

In case there is any conflict of interest on any matter brought before the TAC, the member concerned will have to report the matter to the chairperson, who will decide on the participation of the member.

Notified in 2018, NFRA monitors and enforces compliance on auditing and accounting standards, oversees quality of service and undertakes investigation of auditors with listed entities. Those unlisted entities, with a paid-up capital of up to Rs 500 crore or an annual turnover of over Rs 1,000 crore as of March 31 of the last financial year, will also be reviewed.

It’s mandate is to protect public interest and the interest of investors, creditors, shareholders, etc, that are associated with corporate. The regulator has to achieve this by establishing accounting and auditing quality standards and at the same time also exercise effective oversight of accounting functions performed by companies and auditing by auditors. AQRR is one of the functions of NFRA, where it monitors compliance by corporate, chartered accountants (CAs), etc.

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