NFRA has powers to check past audits: Ex-chief Rangachari Sridharan
Sep 27, 2023
There is no option available to an alleged violator to choose a forum other than the one notified under the law as possessing the jurisdiction, he tells ETCFO.
While the jurisdiction of India’s new independent accounting watchdog, the National Financial Reporting Authority (NFRA), on audits prior to its constitution, may have become a contentious issue, its former and first chief, Rangachari Sridharan, has come in support of the regulator.
Sridharan says the law is explicitly clear and that NFRA has powers to examine past cases.
“There is no option available to an alleged violator to choose a forum other than the one notified under the law as possessing the jurisdiction,” Sridharan exclusively tells ETCFO.
Sridharan’s comments came in the backdrop of the NFRA moving to the Supreme Court against the Telangana High Court order; the state High Court stayed NFRA proceedings against a firm P Murali and Co citing retrospective application of the law and said that the NFRA does not have powers over audit conducted before its constitution on October 1, 2018. The matter will be heard in the Supreme Court on October 13.
“There is a rule that vehicles stop at traffic lights when it's a red light. If one jumps the red light today, which comes under the 14th Metropolitan Magistrates Court in Delhi to cover such offences. Six months later the one who jumped the red light is pulled up by a special court that the government established for traffic assistance, which henceforth will cover all traffic offences under it. While the law has not changed, the forum has,” Sridharan explains.
Before the NFRA came into existence in 2018; the education body, the Institute of Chartered Accountants of India (ICAI) doubled up as the regulator for the CA profession.
‘Settled principle in law’
The ex-NFRA chairman opined, “It is a settled legal principle that change of forum does not prejudice the rights of the person by whom the offence is alleged to have been committed.”
Auditors, even prior to the constitution of the NFRA, have been governed by the Companies Act, 2013 and the Standards of Auditing, and their responsibilities have not been changed with the setting up of the new regulator, Sridharan elucidates.
He stresses that there is no new offence that has been created after the new regulator came into existence.
"The substantive law has not been altered in any way, only the adjudicating forum for deciding on the violation has now been notified as the new body, namely NFRA," Sridharan says.
The NFRA was created following the Punjab National Bank scam in March 2018 to improve public confidence in financial reporting as India's own independent regulator on similar lines to the Public Company Accounting Oversight Board (PCAOB) in the US and the Financial Reporting Council (FRC) in the UK. It was constituted in October 2018 with Sridharan appointed as its first chief for a three-year tenure.
[ET CFO]
