2020-07-19 14:48:11

Extension of the Last Date to filling form NFRA-2

The Ministry of Corporate Affairs has decided to extend the last date of submitting to form NFRA-2 by way of notification on 6 July 2020. The notification is in continuation of the earlier mentioned extension on April 2020.

Accordingly, the deadline for submission of NFRA-2 for the reporting period 2018-19 shall be deemed to be further extended up to 270 days from the date of deployment of NFRA-2 on the website NFRA”.

What is NFRA? What is the purpose of NFRA-2?

National Finance Reporting Authority is an independent organization built for the National Financial Reporting Authority (NFRA) is an independent regulator to oversee the auditing profession and accounting standards in India under Companies Act 2013. By notification dated 24th Oct 2018, section 132and the remaining sections were notified by the MCA.

Section 132 of the Companies Act 2013, a new regulatory authority (NFRA) introduced and replaced the prior authority NACAS possessing independent authority rather than the existing self-regulatory mechanism to an independent regulatory model with enhanced powers.

Later, the MCA notified the National Financial Reporting Authority Rules, 2018 (“NFRA Rules”) by way of notification dated 13th November 2018, to be effective from the 13th November 2018. Such rules include the scope, function, duties, and powers of the NFRA.

Purpose of the form NFRA-2

For ensuring compliance and transparency in the system, the NFRA rules require the eligible auditors to submit an annual return in prescribed form NFRA 2.

As per the NFRA rules, it shall be obligatory for every auditor referred under Rule 3 of the NFRA Rules to file the e-form NFRA 2, an annual return on or before 30th November every year which was due on 30th April of every year before Amendment rules.

Power and Duties of the NFRA

Along with the power of giving consultation the Central Government on the establishment of the accounting standards, the NFRA holds the following powers-

a. Advising the Central Government on formulating and establishing auditing policies and auditing standards;

b. Overseeing compliance with accounting policies and auditing standards in the prescribed manner;

c. Administer the working attributes of the professionals associated with warranting sufficient compliance prescribed standards and recommend steps necessary for betterment in quality and such other related matters ;

d. Investigation of audit firms, summoning and enforcing attendance,

e. Inspection of records.

f. Penalizing individual auditors (min. 1 Lakh to maximum 5 times of fees), a firm of auditors (min. 5 Lakhs to up to 10 times the number of fees).

g. Debarring from Practice as a member of ICAI for a period of 6 months to 10 years.

h. Perform such other prescribed functions;

Applicability of the NFRA Rules

Following class of companies and their auditors come under the authority of NFRA –

i. All Listed companies/ body corporates

ii. Unlisted Companies with paid-up capital or having loans up to the amount of Rs. 500 crores or holding a turnover of not less than Rs. 1,000 crores

iii. All Banks/Insurance/Electricity companies.

iv. Specific overseas business subsidiaries or associates of Indian companies.

Such companies and auditors once administered by the NFRA shall continue to be held so for 3 more years, even where they fail to meet the applicability criteria for the governance of NFRA. Likewise, where the unlisted companies fail to meet the threshold, the ICAI shall have the authority tostart disciplinary proceedings.

Further, the body corporates other than a company incorporated in India and eligible to be administered by the NFRA Rules shall be required to submit the form NFRA 1, giving details of the auditor so appointed within 15 days of the appointment of an auditor as defined under section 139(1) of the Companies Act 2013.

Pre-requisites of the NFRA-2 Form–

As a part of the process of form submission, the following is the list of details/documents required for filling the form-

a. Limited Liability Partnerships Identification Number(LLPIN) or any other registration number of form;

b. Income Tax PAN of auditor (for Indian Firm);

c. Registration Number of Auditor with the regulator /agency;

d. The following details of the companies that need to be filled in-

i. Name of the company/Body corporate

ii. CIN/PAN of the company/Body corporate or FCRN of the company or identity number of the body corporate

iii. Global Location number of company/body corporate;

iv. Details of the Fees received by the auditor from the company/body corporate

v. Currency Conversion rate(if fees received in foreign currency)

e. Network Registration Number of the auditor with the ICAI.