Section 132 of the Companies Act, 2013
Section 132 of the Companies Act, 2013 deals with the constitution and functions of the National Financial Reporting Authority (NFRA).
🔹 Section 132 – Constitution of National Financial Reporting Authority (NFRA)
This section empowers the Central Government to constitute an authority for monitoring, enforcement, and standard-setting of accounting and auditing standards.
✅ Key Provisions:
🏛️ 1. Constitution of NFRA (Section 132(1)):
The Central Government shall, by notification, constitute a National Financial Reporting Authority (NFRA) to:
Make recommendations to the Central Government on accounting and auditing policies and standards.
Monitor and enforce compliance with accounting and auditing standards.
Oversee the quality of service of professionals associated with auditing.
👥 2. Composition (Section 132(2)):
The NFRA shall consist of:
Chairperson (appointed by the Central Government)
A maximum of 15 members (full-time or part-time)
Members should be professionals of eminence in accountancy, law, finance, auditing, etc.
🔍 3. Powers and Functions (Section 132(2A)):
Recommend policies and standards
Monitor and enforce standards
Investigate matters of professional or other misconduct by Chartered Accountants or audit firms (specifically large listed/public interest entities)
⚖️ 4. Investigation and Disciplinary Action (Section 132(4)):
NFRA has powers similar to a civil court and can:
Summon and enforce attendance of persons
Inspect books and documents
Impose penalties:
Individual CA: ₹1 lakh to ₹5 lakhs
Audit Firm: ₹10 lakhs to 10 times the audit fees
Debar individuals or firms for up to 10 years from practice
📝 5. Appeal (Section 132(5)):
An aggrieved party can appeal to the Appellate Authority notified by the Central Government.
📌 Applicability:
Initially applied to listed companies and large public interest entities.
NFRA jurisdiction does not apply to private companies or small unlisted public companies unless specifically notified.
📄 Important Notes:
NFRA was constituted under this section via notification in 2018.
It functions independently of the Institute of Chartered Accountants of India (ICAI) for certain categories.
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