National Financial Reporting Authority (NFRA) - Independent body to audit finance of large companies Video Lecture | Indian Economy for Government Exams (Hindi) - Bank Exams

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hello and welcome to steady IQ in this
lecture we will be discussing about the
national financial reporting Authority
Nara national financial reporting
Authority this has become an important
current affair because in the month of
March 2018 the Union cabinet has
approved national financial reporting
Authority
that means the Union Cabinet has given
approval for the creation of this
Authority the purpose of creating this
Authority is to regulate the finance of
large companies so regulating the
financial audit of large companies is
the purpose financial audit of larger
companies so nefra will be an
independent regulator so this will be an
independent body which will be
responsible for financial auditing or
regulating the financial audit of larger
companies so nefra will be an
independent body and also this will
regulate the auditing profession and the
creation of such an authority was
firstly recommended by the Standing
Committee on Finance
so Standing Committee on Finance first
recommended this creation of such an
authority one thing you must understand
is that nefra will not only have the
power to oversee or regulate chartered
accountants but also it will have the
powers to oversee or regulate the firms
of the chartered accountants so
chartered accountants and also charted
accountant firms will be regulated or
overseen by nefra earlier this was done
by the ICAI Institute of Chartered
Accountants of India
so which whole companies will come under
nefra so under nefra nefra we cover all
ill state companies so all the listed
companies will be covered under nefra
also large
unlisted companies so large unlisted
companies will also be coming under
nefra so when we say large unlisted
companies there should be some benchmark
to determine whether they are large
unlisted companies so this word large so
there should be some benchmark which
decides whether the company is a large
company or not if it is large company
and unlisted company it will command an
F
all the listed companies will come under
nefra so the benchmark for setting or
whether deciding this is a large and
listed company or not this will be given
in the rules so under the rules of the
national financial reporting authority
they will specify which all unlisted
companies comes under the category of
large unlisted companies so this will be
set up in the rules so when we say
listed company an unlisted company you
should have an idea voltage solicited
company and what is an unlisted company
so when we say listed company listed
company means a company whose shares are
traded on an official Stock Exchange so
listed company means the shares of a
company which are traded on a listed
Stock Exchange and when we say unlisted
company the shares of this company or
the shares of the unlisted companies are
not traded in a official Stock Exchange
so we can say that the shares of the
unlisted company are privately owned
so the shares of unlisted companies are
privately owned or they are not traded
on a official Stock Exchange but when it
comes to listed company the shares are
traded on a stock exchange as we already
said nefra we cover all the listed
companies and all the large unlisted
companies and the benchmark of the large
unlisted companies will be set up in the
rules or mentioned in the rules of the
nephron
so nefra covers all Elstad companies
large unlisted companies and also nefra
covers all the instances referred by the
central government
so listed companies large unlisted
companies and hotel instances are
referred by the central government nefra
will also investigate on those issues so
for example the race and Punjab National
Bank scam so if the central government
refers this matter to nefra nefra will
cover that also
so whatever instances are referred to
the nefra by the central government that
also will be covered under the nusrah so
we said that the Union Cabinet approved
the formation or the creation of
national
financial reporting authority in the
month of March 2018 so under the
approval the Union Cabinet has approved
the creation of certain post under nefra
so certain post has also been approved
by the Union Cabinet let us see what are
the post approved by the Union Cabinet
under nefra first of all it approved for
a post of a chairman so the nefra or the
National Financial Reporting Authority
we have a chairman who will head the
authority so there will be a chairman
there will be three full-time members so
there will be three full-time members
under the national financial reporting
authority and also the cabinet has
approved one post for the secretary so
under this nefra there will be a
secretary post also so these three posts
are approved by the Union Cabinet so we
already said that nefra has the power to
not only investigate chartered
accountants but also the forms of the
Chartered Accountants so chartered
accountants and also chartered
accountant firms are covered under nefra
so the National financial reporting
authority can look into our English
against matters relating to the
chartered accountants and also relating
to the firms of the chartered
accountants also NASA has the power to
impose punishments or we can say that
the nefra can impose penalty penalty in
case of any default or misconduct so in
case of individuals that is chartered
accountants chartered accountants are
individuals so in case of chartered
accountants if there is any misconduct
the National Financial Reporting
Authority can impose a penalty of fees
collected into five times so in case of
any misconduct by a chartered accountant
then ephra has the authority to impose a
penalty and the penalty will be or can
be up to five times the fee collected by
the particular chartered accountant so
if there is any misconduct from the side
of chartered accountant then ephra will
impose penalty from the chartered
accountant and when it comes to
chartered accountant firms we said that
it can impose penalty not only to
chartered accountants but also to firms
so when it comes to firms then Ephrathah
at
or the power to impose a penalty of up
to ten times of the fee collected so in
case of individuals it is up to five
times and in case of Chartered
Accountant firms it is up to ten times
of the fee collected by the particular
firm also in case of grave misconduct
the nefra or the national financial
reporting authority has the power to
impose punishments not real penalty but
also punishments so in case of
punishments the nefra can leave our an
auditor for a term of up to ten years
so nefra can diva an auditor up to ten
years so in case of grave misconduct
national financial reporting Authority
has the power to deburr an auditor for
up to a term of ten years so we have
discussed that according to the Union
cabinet approval nefra will have a
chairman it will have three full-time
members and also one poster secretary
and according to nefra nefra can have up
to 15 full-time all part-time members so
nefra can have up to 15 full-time or
part-time members apart from the
chairman so coming to the appellate body
the appellant body can have up to two
members other than the chairman so we
already said that earlier the Chartered
Accountants and the forms of the
Chartered Accountants were governed by
our regulated by the Institute of
Chartered Accountants of India so coming
to ICAI it is a statutory body so it has
given up statutory status this has been
created by an act of the Parliament so
this has been created by the Chartered
Accountants Act of 1949 so earlier this
was responsible for the regulation of
chartered accountants and also the forms
of the chartered accountants so now a
new body has been constituted or has
given approval for Constitution that is
the National financial reporting
Authority or the nefra so even though
nasara has been created the Institute of
Chartered Accountants of India will will
also have the role of regulation so a
patron nefra the ICL will
do the function of regulating which
means even the nefra has been created
ICA will continue to regulate so who
will the ICA regulate in general the
Institute of Chartered Accountants of
India will regulate all its members so
all its members will be regulated by the
ICA also members means the Chartered
Accountants or the auratus so all the
chartered accountants who are a member
of the ICA will be regulated by the ICA
also so that is with regard to the
members and coming to the companies so
coming to companies the Private Limited
companies the Private Limited companies
and the public unlisted companies so the
public unlisted companies and the
Private Limited companies will be
regulated by the ICA I so you must
remember here that the Private Limited
companies and the public unlisted
companies below a certain limit so we
said there will be a benchmark which
will be set under the rules of the nefra
so those Private Limited companies and
public unlisted companies which comes
under the benchmark will be regulated by
the ICA so ICAI
will continue to regulate all the
members that is the chartered
accountants or the auditors in general
ICA will regulate it members also the
Private Limited and the public unlisted
companies below the benchmark level will
also be regulated by the ICA I or the
Institute of Chartered Accountants of
India also one more important thing ICA
Institute of Chartered Accountants of
India will continue its advisory role so
what is the advisory role of ICA I it
will advise with regard to accounting
and auditing practices so it will give
advice to nefra so the new body is nefra
so ICA will give its advice relating to
the accounting and auditing standards
and policies so auditing standards and
policies regarding auditing standards
and policies ICA we render its advice to
National
financial reporting authority now let us
see what is the significance of national
financial reporting Authority or what
was the need for the creation of
national financial reporting Authority
several Financial Accounting scams have
taken place in the country the recent
example is the Punjab National Bank
fraud so in the case of financial
accounting scams a proper regulatory
mechanism was absent so that gave rise
to the need for a national financial
reporting Authority the idea of nefra
came up with the Satyam scam sir Tim's
cameras in the year 2009 so with this
attempt scam the idea of nefra came up
and following the September the Standing
Committee on fineness recommended for a
creation of an audit regulator so
following something scamp Standing
Committee on Finance recommended for a
regulator on auditing one thing you must
remember is that India is the only major
economy where the auditing profession is
self regulated which means that self
regulated means ica that is Institute of
Chartered Accountants of India it is a
self regulatory body so India is the
only major economy wherein the auditing
profession or the auditing is self
regulated so there is a need for a
proper audit regulator so national
financial reporting Authority it is a
independent regulator of the auditing
profession and it attempts to tighten
the regulatory oversight for the
auditors as well as auditing firms that
has chartered accountants and Chartered
Accountant firms in order to plug
loopholes
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