132. Constitution of National Financial Reporting Authority
(1) The Central Government may, by notification, constitute a National Financial
Reporting Authority to provide for matters relating to accounting and auditing standards
under this Act.
(2) Notwithstanding anything contained in any other law for the time being in force,
the National Financial Reporting Authority shall—
(a) make recommendations to the Central Government on the formulation and
laying down of accounting and auditing policies and standards for adoption by
companies or class of companies or their auditors, as the case may be;
(b) monitor and enforce the compliance with accounting standards and auditing
standards in such manner as may be prescribed;
(c) oversee the quality of service of the professions associated with ensuring
compliance with such standards, and suggest measures required for improvement in
quality of service and such other related matters as may be prescribed; and
(d) perform such other functions relating to clauses (a), (b) and (c) as may be
prescribed.
(3) The National Financial Reporting Authority shall consist of a chairperson, who
shall be a person of eminence and having expertise in accountancy, auditing, finance or law
to be appointed by the Central Government and such other members not exceeding fifteen
consisting of part-time and full-time members as may be prescribed:
Provided that the terms and conditions and the manner of appointment of the
chairperson and members shall be such as may be prescribed:
Provided further that the chairperson and members shall make a declaration to the
Central Government in the prescribed form regarding no conflict of interest or lack of
independence in respect of his or their appointment:
Provided also that the chairperson and members, who are in full-time employment with
National Financial Reporting Authority shall not be associated with any audit firm (including
related consultancy firms) during the course of their appointment and two years after ceasing
to hold such appointment.
(4) Notwithstanding anything contained in any other law for the time being in force,
the National Financial Reporting Authority shall—
(a) have the power to investigate, either suo motu or on a reference made to it by
the Central Government, for such class of bodies corporate or persons, in such manner
as may be prescribed into the matters of professional or other misconduct committed
by any member or firm of chartered accountants, registered under the Chartered
Accountants Act, 1949:
Provided that no other institute or body shall initiate or continue any proceedings
in such matters of misconduct where the National Financial Reporting Authority has
initiated an investigation under this section;
(b) have the same powers as are vested in a civil court under the Code of Civil
Procedure, 1908, while trying a suit, in respect of the following matters, namely:—
(i) discovery and production of books of account and other documents, at
such place and at such time as may be specified by the National Financial
Reporting Authority;
(ii) summoning and enforcing the attendance of persons and examining
them on oath;
(iii) inspection of any books, registers and other documents of any person
referred to in clause (b) at any place;
(iv) issuing commissions for examination of witnesses or documents;
(c) where professional or other misconduct is proved, have the power to make
order for—
(A) imposing penalty of—
(I) not less than one lakh rupees, but which may extend to five times
of the fees received, in case of individuals; and
(II) not less than ten lakh rupees, but which may extend to ten times
of the fees received, in case of firms;
(B) debarring the member or the firm from engaging himself or itself from
practice as member of the Institute of Chartered Accountant of India referred to
in clause (e) of sub-section (1) of section 2 of the Chartered Accountants Act,
1949 for a minimum period of six months or for such higher period not exceeding
ten years as may be decided by the National Financial Reporting Authority.
Explanation.—For the purposes of his sub-section, the expression “professional or
other misconduct” shall have the same meaning assigned to it under section 22 of the
Chartered Accountants Act, 1949.
(5) Any person aggrieved by any order of the National Financial Reporting Authority
issued under clause (c) of sub-section (4), may prefer an appeal before the Appellate Authority
constituted under sub-section (6) in such manner as may be prescribed.
(6) The Central Government may, by notification, constitute, with effect from such date
as may be specified therein, an Appellate Authority consisting of a chairperson and not more
then two other members, to be appointed by the Central Government, for hearing appeals
arising out of the orders of the National Financial Reporting Authority.
(7) The qualifications for appointment of the chairperson and members of the Appellate
Authority, the manner of selection, the terms and conditions of their service and the
requirement of the supporting staff and procedure (including places of hearing the appeals,
form and manner in which the appeals shall be filed) to be followed by the Appellate Authority
shall be such as may be prescribed.
(8) The fee for filing the appeal shall be such as may be prescribed.
(9) The officer authorised by the Appellate Authority shall prepare in such form and at
such time as may be prescribed its annual report giving a full account of its activities and
forward a copy thereof to the Central Government and the Central Government shall cause
the annual report to be laid before each House of Parliament.
(10) The National Financial Reporting Authority shall meet at such times and places
and shall observe such rules of procedure in regard to the transaction of business at its
meetings in such manner as may be prescribed.
(11) The Central Government may appoint a secretary and such other employees as it
may consider necessary for the efficient performance of functions by the National Financial
Reporting Authority under this Act and the terms and conditions of service of the secretary
and employees shall be such as may be prescribed.
(12) The head office of the National Financial Reporting Authority shall be at New Delhi
and the National Financial Reporting Authority may, meet at such other places in India as it deems
fit.
(13) The National Financial Reporting Authority shall cause to be maintained such
books of account and other books in relation to its accounts in such form and in such manner
as the Central Government may, in consultation with the Comptroller and Auditor-General of
India prescribe.
(14) The accounts of the National Financial Reporting Authority shall be audited by
the Comptroller and Auditor-General of India at such intervals as may be specified by him
and such accounts as certified by the Comptroller and Auditor-General of India together with
the audit report thereon shall be forwarded annually to the Central Government by the
National Financial Reporting Authority.
(15) The National Financial Reporting Authority shall prepare in such form and at
such time for each financial year as may be prescribed its annual report giving a full account
of its activities during the financial year and forward a copy thereof to the Central Government
and the Central Government shall cause the annual report and the audit report given by the
Comptroller and Auditor-General of India to be laid before each House of Parliament.