The National Financial Reporting Authority (NFRA) plans to initiate discussions with the corporate affairs ministry to increase the number of its members from 12 to 15-18 to build its regulatory capacity, the Authority said in response to the suggestions received from various stakeholders.
NFRA had invited public comments on the recommendations made by its technical advisory committee on enhancing its engagement with stakeholders by July 31. It received 17 comment letters from industry bodies such as Confederation of Indian Industry and NASSCOM, large accounting firms and research and academia.
“NFRA agrees that building regulatory capacity is a critical step to delivering its mandate of protecting public interest in a time bound manner. Some of the aspects relating to recruitment and remuneration of high-quality staff will require deliberation and discussion with MCA, which will be initiated,” NFRA said in its conclusions report.
The regulatory authority also said that it recognised the dynamic nature of the present world and the need for flexibility to quickly align the plans to changing scenarios. NFRA statement was in the context of investors and users of corporate reports are now increasingly focusing on information beyond the financial statements, such as Environment, Social and Governance and sustainability reports and other sources of non-financial information.
The industry representatives also drew NFRA’s attention to transforming use of technology such as data analytics and blockchain in all areas of the company's operations including finance. The suggestion was to move away from traditional approaches of sampling to auditing the entire population to identify exceptions.
“NFRA is persuaded by the suggestion to consider having a series of short-term goals to achieve its objectives instead of medium and long-term plans,” it said.
One of the suggestions received by the financial authority on the issue of press and media guidance was to have limited press interactions until the closure of inspection or investigation as it could cause “significant reputational damage to the concerned parties.”
NFRA however, commented that, ‘The suggestion by Industry Bodies and Audit Firms to withhold information before ‘final” (not clear what this means) determination of such matters in a court of law is entirely self-serving and unknown to any system of jurisprudence.”
It said that the provisions on publication and confidentiality, were on an objective assessment, fully compliant with the principles of natural justice, and were designed to serve the public interest. “Acceptance of these demands would completely destroy any chances of effectiveness of Financial Reporting Regulation.”
NFRA was established in October 2018 as an independent regulator for accounting and auditing in India. It has a responsibility to protect the public interest and the interests of investors, creditors and others associated with public interest entities falling within its jurisdiction.