Centre is likely to institute a new independent regulator the National Financial Reporting Authority (NFRA).
What are the issues with ICAI?
The Institute of Chartered Accounts for India (ICAI) the professional association of chartered accountants.
The ICAI’s has a poor regulatory record, it serves as an argument against self-regulation.
The prosecution rate of the offenders is too low, and the whole process drags on for years with thousands of pending cases with the ICAI,
E.g. only around 25 auditors have faced action in over a decade and around 1,400 cases were pending.
What is NFRA?
The NFRA have adequate powers to enforce compliance of accounting standards and punish violations.
From the earlier agency the National Advisory Committee on Accounting Standards (NACAS) the powers are to be transferred to NFRA.
The proposed NFRA could have as many as 15 members charged with regulating the profession.
The chairman is mandated to advise on issues related to audit and accounting standards and be the regulator for the profession.
The law provides for NFRA to look into matters of professional or other misconduct and also suspend CAs and firms from practising for six months to 10 years.
What is the need for such agency?
The demand for the NFRA is not a new one, the Companies Act of 2013 already provides for such a regulatory body, but it is not efficient.
Instituting a separate body to enforce discipline, the government will be removing a clear conflict of interest.
Many charted accountants help tax evaders hassle free, this agency will help to have check on such people.
The credibility of accounting professionals is a critical component of market functioning.
