Chapter 1

Constitution of National Financial Reporting Authority

1.         NFRA to have Chairperson and other members 

1.1.     Manner of appointment – recommendation of search-cum-selection committee 

1.2.     Persons to be appointed as part time members of NFRA  

2.         Terms and conditions and the manner of appointment of the chairperson and members 

2.1.     Declaration of independence 

2.1.1.  Declaration of Financial and other Interests 

2.1.2.  Oath of office and secrecy 

2.2.     Association with any audit firm and consultancy firm   

2.3.     Resignation by the chairperson or a member

2.4.     Removal of chairperson or any member from NFRA’s office by the Central Government

2.4.1.  Opportunity of being heard before removal

2.4.2.  Procedure for inquiry of misbehavior or incapacity of the chairperson or a member

2.5.     Term of Office and vacancy thereof 

2.6.     Salary and allowances, Pension, Gratuity and Provident Fund, HRA, transport allowance 

2.7.     Leave 

2.8.     Other conditions of service 

3.         Meetings of NFRA  

3.1.     Sitting fee and allowances of Part-time Members 

4.         Secretary and other employees of NFRA  

Chapter 2

Obligations and Powers of NFRA

1.         Obligations 

1.1.     Functions and duties of the Authority 

2.         Powers 

2.1.     Recommending accounting standards and auditing standards 

2.2.     Monitoring and enforcing compliance with accounting standards by NFRA  

2.3.     Monitoring and enforcing compliance with auditing standards by NFRA  

2.4.     Overseeing the quality of service and suggesting measures for improvement

2.5.     Power to investigate 

3.         Appeal against NFRA orders 

4.         Administration obligations of NFRA  

Chapter 3

Classes of Companies and
Bodies Corporate Governed by NFRA

1.         Classes of companies and bodies corporate governed by the Authority 

(1)       Classes of companies and bodies corporate - power to monitor and enforce compliance with accounting standards and auditing standards etc.

(2)       Transitional provisions – information to be filed about the particulars of the auditor

(3)       Body corporate to file information about the particulars of the auditor

(4)       Continuity of companies or bodies corporate to be governed by NFRA even if there is a change in status at a later stage 

2.         Annual Return 

2.1.     Frequently asked questions pertaining to NFRA-2 Form:

3.         Illustration on Classes of companies and bodies corporate governed by NFRA  

Chapter 4

Disciplinary Proceedings and Enforcement by NFRA

1.         Disciplinary proceedings 

(1)       Matter to be referred to concerned division if sufficient cause exists to take disciplinary action and issue of show cause notice thereto the auditor

(2)       Show cause notice to be in writing with prescribed contents 

(3)       Enclosures with show cause notice 

(4)       Manner of serving show cause notice on the auditor

(5)       Disposal of show cause notice within 90 days through a summary procedure 

(6)       Actions that can be provided by the order

(7)       Order to become effective after 30 days from the date of its issue 

(8)       Service of order on the auditor and Regulators 

2.         Manner of enforcement of orders passed in disciplinary proceedings 

(1)       Auditor to deposit penalty within 30 days with NFRA  

(2)       Vacation of auditorship from “all” companies and body corporates - on default in deposit of penalty 

(3)       Penalty and/or debarring order to be sent to continuing companies and body corporates 

(4)       Debarring order to be sent to “all” companies and body corporates 

3.         Miscellaneous 

3.1      Punishment in case of non-compliance 

3.2      Role of chairperson and full-time members 

3.3      Advisory committees, study groups and task forces 

3.4      Financial reporting advocacy and education 

3.5      Confidentiality and security of information 

3.6      Avoidance of conflict of interest

3.7      International associations and international assistance 

Chapter 5

Code of Ethics

1.         Code of Ethics                                                                                                                        

2.         The Chartered Accountants Act, 1949                                                                              

3.         Functions of Council (Section 15)                                                                                       

4.         Committees of the Council (Section 17)                                                                            

4.1      Functions of Executive Committee (Regulation 175 of the Chartered Accountants (Amendment) Regulations, 2008, w.e.f. 25-09-2008)                                                                                                     

4.2      Functions of Finance Committee (Regulation 176A of the Chartered Accountants (Amendment) Regulations, 2008, w.e.f. 25-09-2008)                                                                                                     

5.         Membership of ICAI                                                                                                             

6.         Removal from the Register (Section 20)                                                                            

6.1 Cancellation of Certificate of Practice (The Chartered Accountants (Amendment) Regulations, 2008, w.e.f. 25-09-2008)

7.         Other Services [Section 2(2)(iv)]                                                                                          

8.         Corporate Form of Practice                                                                                                  

9.         Director of a Company:                                                                                                        

10.      Disabilities [Section 8]                                                                                                           

11.      Certificate of Practice [Section 6]                                                                                       

12.      Members acting as Direct Selling Agents                                                                           

13.      Maintenance of Branch Offices [Section 27]                                                                   

14.      Professional Misconduct and Other Misconduct                                                             

15.      Penalty for falsely claiming to be a member, etc. (Section 24)                                     

16.      Clarifications of ICAI as published in the publication “Code of Ethics Plus” and its Website               

16.1    Recent Decisions of Ethical Standards Board [ESB]                                                      

17.      New Disciplinary Mechanism                                                                                              

18.      Disciplinary Directorate (Section 21)                                                                                  

19.      Board of Discipline (Section 21A)                                                                                       

20.      Disciplinary Committee (Section 21B)                                                                               

21.      Authority, Disciplinary Committee, Board of Discipline and Director (Discipline) to have powers of civil court (Section 21C)                                                                                                                                                   

22.      Constitution of Appellate Authority (Section 22A)                                                         

23.      Term of office of Chairperson and members of Authority (Section 22B)                  

24.      Appeal to Authority (Section 22G)                                                                                     

25.      Quality Review Board (Section 28A to 28D of Chapter VIIA)                                     

26.      Schedules to the Chartered Accountants Act, 1949                                                        

FIRST SCHEDULE                                                                                                                           

SECOND SCHEDULE                                                                                                                      

Chapter 6

Quality Review

1.         Quality Review  

               (1)    Scope of quality review  

               (2)    Quality Review Board 

               (3)    Functions of QRB  

               (4)    Process of quality review  

               (5)    Qualifications of Technical Reviewers 

               (6)    On-site visit and Qualified Assistant

               (7)    Confidentiality 

               (8)    Reporting 

               (9)    Basic elements of reviewer’s report

             (10)    Actions that may be recommended by QRB  

             (11)    Standard Operating Procedure (SOP) for conducting Quality Reviews (QRs)

Chapter 7

Constitutional Validity of NFRA

1.         Parallel proceedings by NFRA and ICAI - overlapping authority 

2.         Manifested arbitrariness and excessive delegated legislation 

3.         Autonomous status of ICAI 

4.         Legality of Centre’s NFRA questioned in Madras HC  

5.         National Financial Reporting Authority Has Overriding Powers To Penalise CAs For Professional Misconduct and has the power to investigate cases of misconduct that occurred even before October 24, 2018 – NCLAT Delhi Order (December 2023)

Chapter 8

                  Liabilities of Auditors – At a Glance                1

Chapter 9

Engagement and Quality Control Standards

1.         SA: 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Standards on Auditing                                                                                                                                    

2.         SA: 210 Agreeing the Terms of Audit Engagements                                                       

3.         SA: 220 Quality Control for an Audit of Financial Statements                                    

4.         SA: 230 Audit Documentation                                                                                            

5.         SA: 240 The Auditor’s Responsibility Relating to Fraud in an Audit of Financial Statements               

6.         SA: 250 Consideration of Laws and Regulations in an Audit of Financial Statements           

7.         SA: 260 Communication with Those Charged with Governance (Revised)               

8.         SA: 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management           

9.         SA: 299 Joint Audit of Financial Statement (Revised)                                                   

10.      SA: 300 Planning an Audit of Financial Statements                                                       

11.      SA: 315 Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity and Its Environment                                                                                                                           

12.      SA: 320 Materiality in Planning and Performing an Audit                                             

13.      SA: 330 The Auditor’s Responses to Assessed Risks                                                      

14.      SA: 402 Audit Considerations Relating to an Entity Using a Service Organisation   

15.      SA: 450 Evaluation of Misstatements Identified During the Audit                              

16.      SA: 500 Audit Evidence                                                                                                        

17.      SA: 501 Audit Evidence - Specific Considerations for Selected Items                        

18.      SA: 505 External Confirmations                                                                                         

19.      SA: 510 Initial Audit Engagements - Opening Balances                                                

20.      SA: 520 Analytical Procedures                                                                                            

21.      SA: 530 Audit Sampling                                                                                                       

21.      SA: 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures

22.      550 Related Parties                                                                                                                

23.      SA: 560 Subsequent Events                                                                                                 

24.      SA: 570 Going Concern (Revised)                                                                                      

25.      SA: 580 Written Representations                                                                                        

26.      SA: 600 Using the Work of Another Auditor                                                                    

27.      SA: 610 Using the Work of Internal Auditors (Revised)                                                 

28.      SA: 620 Using the Work of an Auditor’s Expert                                                              

29.      SA: 700 Forming an Opinion and Reporting on Financial Statements (Revised)      

30.      SA: 701 Communicating Key Audit Matters in the Independent Auditor’s Report  

31.      SA: 705 Modifications to the Opinion in the Independent Auditor’s Report (Revised)           

32.      SA: 706 Emphasis of Matter Paragraphs and Other Matter Paragraphs in the Independent Auditor’s Report (Revised)

33.      SA: 710 Comparative Information - Corresponding Figures and Comparative Financial Statements 

34.      SA: 720 The Auditor’s Responsibility in Relation to Other Information in Documents Containing Audited Financial Statements (Revised)                                                                                                             

35.      SA: 800 Considerations - Audits of Single Financial Statements Prepared in Accordance with Special Purpose Frameworks                                                                                                                                                   

36.      SA: 805 Special Considerations - Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement                                                                                                               

37.      SA: 810 Engagements to Report on Summary Financial Statements                         

39.      SRE: 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity      

40.      SAE: 3400 The Examination of Prospective Financial Information                           

41.      SAE: 3402 Assurance Reports on Controls at a Service Organisation                         

42.      SAE: 3420 Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus                                                                                                                                

43.      SRS: 4400 Engagements to Perform Agreed-upon Procedures regarding Financial Information          

44.      SRS: 4410 Compilation Engagements (Revised)                                                             

Chapter 10

Pronouncements made by NFRA

1.         Non-Accrual of interest on borrowings in violation of Ind AS 

2.         Non-Compliance with Ind AS on accounting policies for measurement of Revenue from Contract with customers and Trade Receivables 

3.         Responsibility of Statutory Auditors in reporting fraud 

4.         Financial Report Quality Review by NFRA – observations under Ind AS 

5.         NFRA Orders 

Appendix 1    Section 132 of the Companies Act, 2013                              

Appendix 2    Press Release                                                                          

Appendix 3    The National Financial Reporting Authority (Manner… of Appointment and other Terms and Conditions of Service of Chairperson and Members) Rules, 2018   

Appendix 4    National Financial Reporting Authority Rules, 2018            

Appendix 5    National Financial Reporting Authority (Meeting for Transaction of Business) Rules, 2019                                                                                               

Appendix 6   National Financial Reporting Authority (Recruitment, Salary, Allowances and Other Terms and Conditions of Service of Secretary, Officers and Other Employees of Authority) Rules, 2019