The status of NFRA and ICAI as on date - Revised and Updated

While appreciating the standpoint of many professionals who don't agree with my viewpoints and are unhappy with the fact that NFRA is our disciplinary regulator, if you look at the corporate scams since Satyam very little legal action has been taken against the respective audit firms including scrapping of the law (in the Chartered Accountants Act, 1949) that no action can be taken against any audit firm. Only a member can be punished. This law was enacted more than seventy years back. And it still remains the same. A firm can never be punished.

A lot of soul searching is required from us (Chartered Accountants) to come to the conclusion that whatever has happened so long was right. I'm not going into the details of the cases which all of you know and on which I have written a lot. But what's wrong in having a separate disciplinary regulator?

I would like you to read the Audit Quality Review Reports of NFRA pertaining to BSR & Co., LLP (KPMG) and Deloitte pertaining to IL&FS, and Rajendra K Goel & Co. on Jaiprakash Associates Limited before you come to any conclusion.

The problems lie elsewhere. One important problem is that 5 CAs out of a total of 11 members are sitting in the governing board of NFRA and messing up the entire work that has been done by NFRA since 2018. How can you have 5 CAs sitting in the governing body of the disciplinary regulator? What are they supposed to do? Your guess is as good as mine.

One important eligibility of becoming a NFRA member. All the NFRA members including the chairperson who are in full-time employment cannot be associated with any audit firm (including related consultancy firms) during their term of office and 2 years thereafter.

The ICAI will now have to consult with NFRA and examine its recommendations in this regard. Thus the National Advisory Committee on Accounting Standards is effectively replaced by the NFRA.

The ICAI Central Council constitutes of 40 members of whom 32 are elected by the Chartered Accountants and remaining 8 are nominated by the Central Government generally representing the Comptroller and Auditor General of India, Securities and Exchange Board of India, Ministry of Corporate Affairs, Ministry of Finance and other organisations.

We hope that the new Central Council which will take charge very soon will make effective changes in this regard to the rules and regulations to make them effective and professional and make us accountable to begin with.

Updates as on 21-02-2022

28th September, 2021 - Conduct regulatory impact assessment for accounting standards revision : NFRA tells ICAI

10th October, 2021 - NFRA plans to redraft audit norms for small firms

11th October, 2021 - ICAI, NFRA clash over audit of small firms

27th December, 2021 - Chartered Accountancy Bill : Proposal to have non CAs in ICAI Panel irks fraternity

21st February, 2022 - Statutory auditors may not get large companies’ non-audit operations

These need to be written on very soon.

To be continued