MCA issues National Financial Reporting Authority Rules, 2018 (Rules) in order to monitor and enforce compliance with accounting and auditing standards and oversee the service and investigation of the auditors appointed by the companies.The Rules stated the following class of companies that will be governed by the Rules
(a) Listed on stock exchange in and outside India
(b) Unlisted public companies having paid-up capital of not less than Rs. 500 crores or having annual turnover of not less than Rs. 1000 crores or having, in aggregate, outstanding loans, debentures and deposits of not less than Rs. 500 crores as on the 31st March of immediately preceding financial year;
(c) Insurance companies, banking companies, companies engaged in the generation or supply of electricity, companies governed by any special Act
(d) any corporate bodies or companies on a reference made to the Authority by the Central Government in public interest; and
( e) any companies subsidiary or associate company incorporated in or outside India whose income or networth of the subsidiary or associate company exceeds 25 % of the consolidated income or consolidated networth of such company or the body corporate.
The mentioned above class of companies are required to inform NFRA the details of the auditor within 30 days of the commencement of these rules . In addition, MCA specifies that NFRA will continue for 3 years after the company is ceased to be listed or its paid – up capital or turnover or aggregate of loans, debentures and deposits falls below the mentioned limit.
Under the Rule, the auditors that will come under the ambit of the Rule are required to file the return on or before 30th April of every year to the Authority.
The Rules further states that NFRA has the power to investigate and hold disciplinary proceedings in any matter received from Central Govt. about the professional or other misconduct u/s 132 (4) of Companies.
The Rules also states that incase any company or any officer of the company or an auditor or any other person violates any provision would be punished under Section 450 of the Companies Act, 2013.