ICAI Seeks Powers To Complete Probes, Implement NFRA Orders
The Institute of Chartered Accountants of India, in a paper, has sought more powers for effective regulation and implementing orders of the National Financial Regulatory Authority.
The NFRA, constituted by the Ministry of Corporate Affairs in October last year, and was tasked with recommending accounting and auditing standards, ensuring compliance and overseeing the audit and accountancy profession in India. With this, certain powers which originally vested in the ICAI were transferred to the NFRA.
The ICAI had opposed the move.
In a position paper, the ICAI made suggestions to the government:
Once rules governing the functions of the NFRA were notified in November, the existing power of the ICAI to initiate proceedings against an auditor for any professional misconduct was transferred to the new regulator. Section 132 says that once the NFRA initiates any investigation, all other regulatory bodies will cease to have jurisdiction.
The ICAI, in the paper, said there were certain ongoing cases where either an inquiry or investigation was initiated or a notice was issued. To facilitate a smooth transition, the ICAI suggested a transitory provision in the Companies Act that will allow it continue an enquiry and pass orders in such matters.
Power to Notify NFRA Orders
The ICAI suggested an amendment in the Chartered Accountants Act to let it notify and implement an order passed by the NFRA. Currently, the ICAI can only implement the orders passed by its board or the disciplinary committee.
Powers To Take Action Against Audit Firms
The ICAI lacks any power for initiating punitive action against an audit firms. The largest of the audit firms in India are organised as limited liability partnerships.
The ICAI suggested:
- An amendment in the Chartered Accountants Act to empower the institute to initiate action for professional misconduct against an audit firm either itself or under any complaint or reference by a government agency.
- These powers will be independent of the powers granted to the NFRA under Section 132 of the Companies Act.
Register Of Firms
The regulatory jurisdiction of the ICAI was limited to individual auditors since its inception. Therefore, the Chartered Accountants Act did not contain any provision for maintenance of a register of firms.
Section 132 of the Companies Act empowers the NFRA to pass order against an audit firm. To help implement such orders, the ICAI suggested an amendment that will allow it to maintain a register of firms.