Roles of NFRA and ICAI are not overlapping but complementary: Pandey
Nov 15, 2023
The institutional mechanism is clearly laid out between the two regulatory bodies, the chairperson of NFRA said.
There is no overlapping of roles between the two accounting regulators of India, the National Financial Reporting Authority and the Institute of Chartered Accountants of India, said the new watchdog's chairperson Ajay Bhushan Pandey.
The roles of ICAI and NFRA are complementary and not overlapping. Both are working in tandem and for the public good. We have the institutional mechanism clearly laid down.NFRA Chairperson Ajay Bhushan Pandey told ETCFO
It is to be noted that NFRA is the new independent accounting regulator, and was constituted in October 2018 in the backdrop of Rs 1-lakh crore fraud erupting then at the country’s construction financier IL&FS. It was created on similar lines of the Public Company Accounting Oversight Board in the US and the Financial Reporting Council in the UK. The ICAI was the sole accounting regulator previously but now regulates only the auditors of private companies while NFRA regulates auditors of all public interest entities. Also, the NFRA has more powers and a larger scope than the ICAI.
Pandey explained his point, saying the ICAI recommends the accounting and the auditing standards to the NFRA and the NFRA thereafter recommends them to the central government. Also, as far the disciplinary action is concerned, both the regulators have their jurisdictions clearly defined, he added.
“While the NFRA has the mandate of overseeing the financial reporting of the public interest entities, the remaining entities including the private companies continue to come under the Institute of the Chartered Accountants of India. So, overall the roles of NFRA and the ICAI are complementary,” said the NFRA head.
The relationship between the ICAI and NFRA had turned sour in the early years.
NFRA’s first chairperson Rangachari Sridharan in an interview with The Economic Times Prime, just before his tenure was to end in October 2021, claimed there was a "regulatory capture". Sridharan alluded to the ICAI’s lobby to the accounting bodies’ common parent, the corporate affairs ministry, for diluting the NFRA’s powers.
Pandey took over as NFRA’s second full-time chairperson in June 2022. He is currently serving the second year of his term.