The Ministry of Corporate Affairs (MCA) on 5th March 2020, passed a circular stating the extension of the last date for filing of Form NFRA-2 after the due examination. The time limit for filing the Form NFRA-2, for the Financial Year 2018-19, will be 150 days from the date of implementation of the Form on the website of the NFRA.
Review of NFRA Rules
There was an amendment made on 5th September 2019 by the Ministry of Corporate Affairs (MCA) regarding the National Financial Reporting Authority Rules, 2018, also known as NFRA Rules and now these rules are called National Financial Reporting Authority (Amendment) Rules, 2019 which has come into force from the date of the publication in the Official Gazette.
National Financial Reporting Authority (NFRA) was established under Section 132 of the Companies Act, 2013 as a quasi-judicial body with the power to guarantee mainly the quality of financial reporting.
Power and need of NFRA-2
Due to growing fraud in the Financial Sector, the Government of India after suitable contemplation with the top authorities of India formed a body called the National Financial Reporting Authority (NFRA). This Authority was established to regularize the audit standard that prevails in India.
The objective of Form NFRA-2
NFRA-2 purpose is to file Annual Return with the National Financial Reporting Authority by the auditor, where they can mention Identity details, contact details, category, reporting period, jurisdictional information, Audit clients and reports, memberships, etc.
The power of the Authority are as follows –
- Recommend accounting as well as auditing policies and standards to be adopted;
- Observe and enforce compliance with accounting and auditing standards.
- The Financial Reporting Authority is empowered to supervise the quality of audit service and undertake the inspection of a company whose security is listed on any stock exchange in India, according to the Companies Act, 2013.
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The Authority has the power to observe and enforce compliance with accounting auditing standards, supervise the quality of service or undertake the inspection of the following companies and body corporate, namely: –
- The companies whose securities are listed on any stock exchange inside or outside India;
- Unlisted public companies having a capital of not less than Rs 500 crores or annual turnover of not less than Rs 1000crores or having outstanding loans, debentures and deposits of not less than 500 crores as on 31st March of the previous financial year;
- Companies engaged in the generation and supply of electricity;
- Reference made to the compelling Authority by the Central Government in the public interest, and
- Any company registered outside India, which is a subsidiary company of any company registered in India.
Annual Form NFRA 2 is to be filed by the Auditors
Auditors covered under Rule 3 of NFRA rules should file an Annual Return on or before 30th November every year.
Non-Compliance of National Financial Reporting Authority
Every officer of the company who is the auditor who contravenes any of the provisions of the rules shall be punishable under the provisions of section 450 of the Act.
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