NFRA is also responsible for setting accounting standards in the country. It is basically a legal watchdog for the auditing profession. The primary objective of NFRA is to oversee and enforce compliance with accounting and auditing standards by companies in India.

Its mandate is to improve the quality and consistency of financial statements in the country and ensure that businesses and financial institutions disclose accurate and fair information. NFRA has jurisdiction over different classes of companies, including listed companies, large unlisted companies, and other prescribed classes of companies as per the Companies Act. It can probe listed as well as unlisted public companies.
 

The NFRA has the same power as the Civil Court. It may demand the production of books of account, oaths and other documents, and may examine persons under oath. It has the authority to investigate matters of misconduct involving CAs and potentially prevent them from practising for 10 years. 
 

Composition: The NFRA consists of a chairperson, three full time members and a secretary. The total numbers of members should not exceed 15. All the members of the NFRA must declare no conflicts of interest. NFRA will also be responsible for ensuring the quality of services provided by its members.
 

Powers and Functions

• NFRA has the authority to review and assess the quality of financial reporting by companies.
• NFRA has a Quality Review Board to conduct quality reviews of audit services provided by the auditors of companies. It is responsible for monitoring and regulating the performance of audit professionals and audit firms.
• NFRA may provide recommendations to the Central Government on the formulation and laying down of accounting and auditing policies and standards for adoption by companies or classes of companies.
• NFRA submits an annual report to the Central Government, which includes details of its activities and recommendations.
• NFRA has the power to impose penalties and take disciplinary actions against auditors and audit firms for professional misconduct and non-compliance with accounting and auditing standards.

Overall, the authority is responsible for recommending accounting and auditing policies and standards, monitoring and enforcing compliance with these standards, and overseeing the quality of service of the professions associated with ensuring compliance with such standards. 
 

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