New Delhi: The fraud at the Punjab National Bank (PNB) without doubt raises questions about the quality of auditing in India. Following this failure of the audit system at PNB's Mumbai branch for seven years, the government is planning to notify the National Financial Reporting Authority (NFRA).
Sources close to the development told Zee Business that NFRA will be notified soon. After notification, the National Financial Reporting Authority (NFRA) will be the body that will regulate chartered accountants in the country and set standards for their functioning. In the case where professional or other misconduct in auditing is proved, stringent penalty provisions have been proposed under NFRA. In case of individuals, the penalty will not be less than one lakh rupees, but it may extend to five times of the fraudulent amount. For audit firms, the penalty could be between ten lakh rupees and exceed up to ten times of the fees received.
At present, the penalty imposed for misconduct by auditors is one lakh rupees.
In addition, the individual or the firm will be debarred from engaging himself/itself from practising as a member of the Institute of Chartered Account of India for a minimum period of six months or for a higher period not exceeding ten years.
At present, auditors are regulated by the Institute of Chartered Accountants of India (ICAI), which was set up under Section 28A of the Chartered Accountants Act, 1949. The act has mandated the body to conduct independent audit quality reviews.
Creation of National Financial Reporting Authority (NFRA) was proposed in Companies Act 2013, but the body never came into existence. It was proposed for the establishment and enforcement of accounting and auditing standards and oversight of the work of auditors.
- (Reported by Alok Priyadarshi)