National Financial Reporting Authority (NFRA): Requirement of Form 1

 BACKGROUND

National Financial Reporting Authority (“NFRA”) is newly set up independent regulator of the Audit profession. It is one such body proposed under Companies Act 2013 to double check and to oversee the quality of service rendered by Chartered Accountants in India to provide review on matters relating to Accounting and Auditing standards and thereby suggesting measures of improvement.

Prior to the set up of NFRA, ICAI used to monitor the Auditors of big companies.

This move for establishment of NFRA is to act against erring Auditors and Auditing firms to reduce the corporate scams in India, thereby to ensure better compliances by the Indian Corporates.

The relevant provisions to NFRA are:

·         Sub section (2) and (4) of Section 132:- Constitution of National Financial Reporting Authority

·         Sub section (1) of Section 139:- Appointment of Auditors

·         Sub section (1) of Section 469:- Power of Central Government to Make Rules

·         The National Financial Reporting Authority rules, 2018

The classes of the companies and bodies corporate governed by the NFRA are well stated in Rule 3 of the Rules, 2018

1)    Listed companies;

2)    Unlisted companies with paid up capital of INR 500 crore or more or Annual Turnover of INR 1000 crore or more or outstanding loans, debentures and deposit of more than INR 500 crore or more, as on 31st March of immediate preceding FY

3)    Insurance Companies, banking companies, companies with business of generation or supply of electricity, companies governed with special act or companies incorporated in reference with clauses (b) to (f) of Section 1(4)

4)    Any reference made by Central Government to NFRA authority

5)    Body corporate registered outside India, which is subsidiary or associate company of companies or body corporate registered in India, with income or Net worth of subsidiary or associate company is plus 20% of consolidated income / consolidated Net worth (body corporate as defined in this clause are required to file Form NFRA-1)

Rule 3(2) states that every existing body corporate (other than the one stated in point 1 to 5 above) are required to file Form NFRA-1 (details of auditor) within 30 days from rules been notified i.e. :

·         Private companies

·         Unlisted companies which are not covered under Rule 3(1)

·         Any other companies / body corporate which are not governed under NFRA authority and NFRA Rules

Rule 3(3) states that Body corporate other than companies as defined under Section 2(20) to intimate appointment of auditor within 15 days in Form NFRA-1. Please note that as per Rule 3(2), companies from (a) to (d) are not required to file form NFRA-1.

Information / Documents required to file form NFRA-1:

                                                                                                     

Indian Body Corporate

Foreign Body Corporate

1)    PAN of Indian authorized individual 2)    PAN of body corporate 3)    DIN of Director/Membership No. of CS/PAN of Manager or CEO or CFO 4)    Income tax PAN of auditor/audit firm 5)    Membership number of auditor/auditor firm registration number 6)    In case the auditor is appointed due to casual vacancy, then membership no. of auditor or registration no. of audit firm who/which vacated the office needs to be provided in the form. 7)    Copy of written consent given by auditor & Copy of resolution passed by the body corporate 8)    Digital Signature (DSC) of User (Director/Manager/CEO/CFO/Company Secretary)

1)    Passport Number of foreign authorized individual 2)    Registration number of foreign body corporate and name of provider of registration number