Page 22 - Banking Finance April 2018

LEGAL UPDATE

LEGAL

CASES
CASES
CASES
CASES
CASES

Supreme Court direction Call for expanding the scope of National Financial re-
to scrutinize audit firms porting authority

Supreme Court directed the Union ICAI is under pressure from members to actively lobby with the government
government to and make sure that rules framed for the Na-
constitute a tional Financial Reporting Authority (NFRA)
three-member end up protecting the interests of the finan-
committee of cial audit profession.
experts to scru-
Members are demanding that the CA profes-
tinize the existing regulatory regime
sion be only regulated by the Institute of Char-
and propose changes if required.
tered Accountants of India (ICAI). Some have
The ruling comes at a time when the even suggested that the scope of NFRA be enlarged to look at misconduct of
role of auditors is already under scru- company secretaries, cost accountants and other professionals like lawyers, ac-
tiny for their failure to detect the tuaries, system auditors engaged with listed companies.
Rs.11,400 crore fraud allegedly per-
"NFRA's scope should be enlarged by roping in other professionals working in
petuated by group firms of jewellers
the corporate sector. They should also be investigated for misconducts with
Nirav Modi and Mehul Choksi in col- regard to listed companies. NFRA could be renamed as say National Corporate
lusion with officials of state-run Review Authority," G Ramaswamy, former CA Institute President, told.
Punjab National Bank.
Past presidents have said that there should be no concurrent jurisdiction in regu-
"Financial statements audited by lating the CA professionals and there should not be overlapping of National Fi-
qualified auditors are acted upon nancial Reporting Authority with CA Act, 1949.
and failures of the auditors have re-
sulted into scandals in the past. The Makarand Lele, President of the Institute of Company Secretaries of India (ICSI),
auditing profession requires proper said that as of today NFRA does not cover misconduct of company secretaries
oversight," the court observed. as regards Secretarial audits done on listed companies.
The committee has to be set up within "As of today, it does not cover Secretarial Audits. It may eventually come in the
two months and will thereafter be re- coming days, but we really don't know. There is no official word on this right
quired to submit its findings to the Su- now," Lele told BusinessLine when asked if Company Secretaries would come
preme Court in three months. The Su- under NFRA purview. The current law says that NFRA will cover only financial
preme Court order said it would need auditors.
to consider the need for an appropri- "If there is an intention of the government to bring professionals of all other
ate legislation or mechanism to govern audits - secretarial audit, cost audit etc to NFRA, they have to move amend-
the profession of auditors. ments to the company law," Lele said.

22 | 2018 | APRIL | BANKING FINANCE