Committee of experts formed by MCA recommends establishment of NFRA

Committee of experts formed by MCA recommends establishment of NFRA . Report of Committee of experts on regulating Audit firms and the NetworkReleased. Committee of experts formed by MCA recommends establishment of NFRA The Committee of Experts to look into the regulating audit firms and the networks has presented its report to the government. The findings and recommendations aimed to address the issues raised by the Hon'ble Supreme Court in its judgement in S. Sukumar versus The Secretary, Institute of Chartered Accountants of India (February 23, 2018) with a focus to strengthen the legal regime of auditors and promote development of the audit profession in the country. The COE has strongly recommended the establishment of NFRA. Some of the reasons given by them are :

1. The COE is of the view that establishment of NFRA createsno inconsistency between the provisions of the Companies Act, 2013 and the Chartered Accountants Act, 1949.
2. The COE observes that with the recent move towards establishment of NFRA, India has adopted the current global best practice in this regard which can address the problems experienced with self-regulation of the audit profession.
3. The COE observes that NFRA has been structured on the lines of international best practices followed by other independent audit regulators in advanced jurisdictions.
4. The COE recommends that NFRA could be further strengthened and therefore, the rules which are presently being formulated, must provide powers to NFRA to publish audit inspection results, subject to necessary checks and balances. This will strengthen NFRA further and will provide an effective tool of deterrence for better compliance by the auditors of public companies with the applicable laws and professional standards.
5. The COE observed that there are benets of having multiple competiting SROs under one independent regulator like in UK as well as in the new insolvency profession in India. The COE is of the view that a similar model may be considered for the Indian audit profession.

Click here to download theReport of Committee of experts on regulating Audit firms and the Network.This report also contains the judgement of Supreme Courtin matter of S. Sukumar versus The Secretary, Institute of Chartered Accountants of India (February 23, 2018) .