132. Constitution of National Financial Reporting Authority

(1) The Central Government may, by notification, constitute a National Financial

Reporting Authority to provide for matters relating to accounting and auditing standards

under this Act.

(2) Notwithstanding anything contained in any other law for the time being in force,

the National Financial Reporting Authority shall—

(a) make recommendations to the Central Government on the formulation and

laying down of accounting and auditing policies and standards for adoption by

companies or class of companies or their auditors, as the case may be;

(b) monitor and enforce the compliance with accounting standards and auditing

standards in such manner as may be prescribed;

(c) oversee the quality of service of the professions associated with ensuring

compliance with such standards, and suggest measures required for improvement in

quality of service and such other related matters as may be prescribed; and

(d) perform such other functions relating to clauses (a), (b) and (c) as may be

prescribed.

(3) The National Financial Reporting Authority shall consist of a chairperson, who

shall be a person of eminence and having expertise in accountancy, auditing, finance or law

to be appointed by the Central Government and such other members not exceeding fifteen

consisting of part-time and full-time members as may be prescribed:

Provided that the terms and conditions and the manner of appointment of the

chairperson and members shall be such as may be prescribed:

Provided further that the chairperson and members shall make a declaration to the

Central Government in the prescribed form regarding no conflict of interest or lack of

independence in respect of his or their appointment:

Provided also that the chairperson and members, who are in full-time employment with

National Financial Reporting Authority shall not be associated with any audit firm (including

related consultancy firms) during the course of their appointment and two years after ceasing

to hold such appointment.

(4) Notwithstanding anything contained in any other law for the time being in force,

the National Financial Reporting Authority shall—

(a) have the power to investigate, either suo motu or on a reference made to it by

the Central Government, for such class of bodies corporate or persons, in such manner

as may be prescribed into the matters of professional or other misconduct committed

by any member or firm of chartered accountants, registered under the Chartered

Accountants Act, 1949:

Provided that no other institute or body shall initiate or continue any proceedings

in such matters of misconduct where the National Financial Reporting Authority has

initiated an investigation under this section;

(b) have the same powers as are vested in a civil court under the Code of Civil

Procedure, 1908, while trying a suit, in respect of the following matters, namely:—

(i) discovery and production of books of account and other documents, at

such place and at such time as may be specified by the National Financial

Reporting Authority;

(ii) summoning and enforcing the attendance of persons and examining

them on oath;

(iii) inspection of any books, registers and other documents of any person

referred to in clause (b) at any place;

(iv) issuing commissions for examination of witnesses or documents;

(c) where professional or other misconduct is proved, have the power to make

order for—

(A) imposing penalty of—

(I) not less than one lakh rupees, but which may extend to five times

of the fees received, in case of individuals; and

(II) not less than ten lakh rupees, but which may extend to ten times

of the fees received, in case of firms;

(B) debarring the member or the firm from engaging himself or itself from

practice as member of the Institute of Chartered Accountant of India referred to

in clause (e) of sub-section (1) of section 2 of the Chartered Accountants Act,

1949 for a minimum period of six months or for such higher period not exceeding

ten years as may be decided by the National Financial Reporting Authority.

Explanation.—For the purposes of his sub-section, the expression "professional or

other misconduct" shall have the same meaning assigned to it under section 22 of the

Chartered Accountants Act, 1949.

(5) Any person aggrieved by any order of the National Financial Reporting Authority

issued under clause (c) of sub-section (4), may prefer an appeal before the Appellate Authority

constituted under sub-section (6) in such manner as may be prescribed.

(6) The Central Government may, by notification, constitute, with effect from such date

as may be specified therein, an Appellate Authority consisting of a chairperson and not more

then two other members, to be appointed by the Central Government, for hearing appeals

arising out of the orders of the National Financial Reporting Authority.

(7) The qualifications for appointment of the chairperson and members of the Appellate

Authority, the manner of selection, the terms and conditions of their service and the

requirement of the supporting staff and procedure (including places of hearing the appeals,

form and manner in which the appeals shall be filed) to be followed by the Appellate Authority

shall be such as may be prescribed.

(8) The fee for filing the appeal shall be such as may be prescribed.

(9) The officer authorised by the Appellate Authority shall prepare in such form and at

such time as may be prescribed its annual report giving a full account of its activities and

forward a copy thereof to the Central Government and the Central Government shall cause

the annual report to be laid before each House of Parliament.

(10) The National Financial Reporting Authority shall meet at such times and places

and shall observe such rules of procedure in regard to the transaction of business at its

meetings in such manner as may be prescribed.

(11) The Central Government may appoint a secretary and such other employees as it

may consider necessary for the efficient performance of functions by the National Financial

Reporting Authority under this Act and the terms and conditions of service of the secretary

and employees shall be such as may be prescribed.

(12) The head office of the National Financial Reporting Authority shall be at New Delhi

and the National Financial Reporting Authority may, meet at such other places in India as it deems

fit.

(13) The National Financial Reporting Authority shall cause to be maintained such

books of account and other books in relation to its accounts in such form and in such manner

as the Central Government may, in consultation with the Comptroller and Auditor-General of

India prescribe.

(14) The accounts of the National Financial Reporting Authority shall be audited by

the Comptroller and Auditor-General of India at such intervals as may be specified by him

and such accounts as certified by the Comptroller and Auditor-General of India together with

the audit report thereon shall be forwarded annually to the Central Government by the

National Financial Reporting Authority.

(15) The National Financial Reporting Authority shall prepare in such form and at

such time for each financial year as may be prescribed its annual report giving a full account

of its activities during the financial year and forward a copy thereof to the Central Government

and the Central Government shall cause the annual report and the audit report given by the

Comptroller and Auditor-General of India to be laid before each House of Parliament.