NFRA creates Database of companies and auditors

The National Financial Reporting Authority is creating a database of companies and auditors.

What is the plan?

As a first step of establishing the database, NFRA is to identify and verify the primary data sources. This is essential because certain data such as Company Identification Number is different from different sources. NFRA is to collect data from the Corporate Data Management division that operates under the Ministry of Corporate Affairs and also from other three stock exchanges in India.

NFRA has so far compiled data of 6,500 companies. This includes 5,300 listed companies and 1,000 unlisted companies.

Legal Provisions

The National Financial Reporting Authority is a regulatory body set up under Section 132 of Companies Act.

According to the act, the authority should have a chairperson and maximum of fifteen members. They are appointed by the Central Government.

National Financial Reporting Authority

  • It was constituted in 2018.
  • The NFRA recommends auditing and accounting policies and standards to be adopted by companies for approval from the Union Government.
  • It monitors compliance with auditing standards and accounting standards.
  • The NFRA has powers to investigate misconduct committed by the members of ICAI. ICAI is Institute of Charted Accountants of India.

Why was NFRA established?

The NFRA was established to control the accounting scams increasing in the country. It was essential to create an independent regulator to enforce auditing standards. There was a need to increase investor and public confidence in financial disclosure of companies.

Inception

After the Satyam Scandal that occurred in 2009, the NFRA was recommended by the Standing Committee on Finance for the first time in its 21st report.

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