A clause in India’s Company Bill, currently awaiting clearance from one of two houses of Parliament, proposes the formation of a National Financial Reporting Authority (NFRA) to provide for matters relating to accounting and auditing standards.
The NFRA is expected to be headed by a person with expertise in accountancy, auditing, finance or law and will be appointed by the Central government, along with 15 full time and part time members.
It will co-exist with the Institute of Chartered Accountants of India (ICAI), which currently governs financial regulation, with the division of work between the two to be spelt out once the bill is passed.
It has been speculated by ICAI members in Indian media reports that the NFRA will supersede the ICAI, with one member describing the move as a "land grab" by the government.
The NFRA will set accounting standards and be able to take disciplinary action against members, including against firms, whilst the ICAI, which currently sets accounting standards, can only take action against individuals.
Firms have also been nervous over the creation of the governmental body, with KPMG suggesting the new provisions would question the validity of the concept that a professional should be judged by his peers, whilst others have expressed concerns about regulation.
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The move follows the 2008 Satyam Computer accounting fraud scandal, where auditors missed the company over stating cash balances by about $1bn and revenues by $1.1bn.
Institute of Chartered Accountants of India