NFRA to mandate Annual Transparency Reports
2023 JAN 17
Economic Development > Indian Economy and Issues > Government agencies
Why in news?
- The National Financial Reporting Authority (NFRA) has proposed introducing Annual Transparency Reports (ATR) requirements for audit firms.
More about the News:
- The effort is aimed at enhancing the transparency about management and governance of audit firms and their internal policy framework to ensure high-quality audits and prevent conflict of interest by maintaining independence.
About National Financial Reporting Authority (NFRA):
- It is an audit regulator constituted in 2018 by the Government of India under section 132(1) of the Companies Act, 2013.
- The regulator will have 15 members including a chairperson, three full-time members and others as part-time members.
- NFRA recommend accounting and auditing policies and standards to be adopted by companies for approval by the Central Government;
- Monitor and enforce compliance with accounting standards and auditing standards;
- Oversee the quality of service of the professions associated with ensuring compliance with such standards and suggest measures for improvement in the quality of service.
- It can undertake investigation and impose penalties related to the following class of companies and bodies corporate namely:
- Companies whose securities are listed on any stock exchange in India or outside India.
- Unlisted public companies having paid-up capital of not less than Rs. 500 crores or having annual turnover of not less than Rs. 1,000 crores.
- Insurance companies, banking companies and companies engaged in the generation or supply of electricity.
About Annual Transparency Reports (ATR):
- The ATR requirements are proposed to be implemented in a gradual manner for PIEs (Public Interest Entities) starting with statutory auditors of top 1,000 listed companies (by market capitalization) with effect from the financial year ending on 31 March 2023.
- An audit firm will have to publish the ATR within three months from the end of each financial year.
- The ATR report will provide certain critical information about the auditor’s operational activities, management, governance and ownership structures, and policies and procedures necessary to deliver high-quality audits etc.
- The information contained in the ATR will be useful to the investors, audit committees, independent directors and the public at large.
Consider the following statements regarding ‘National Financial Reporting Authority (NFRA)’:
1. It was established under the Companies Act, 2013.
2. Its account is monitored by the Comptroller and Auditor General of India.
Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2