ZipLaw
Bare Act Reader NFRA Rules
NFRA Rules G.S.R. 1111(E)

The National Financial Reporting Authority Rules, 2018

The classes of company and body corporate governed by the Authority, its functions and duties, the annual return in NFRA-2, recommending and monitoring accounting and auditing standards, overseeing audit quality, investigation and disciplinary proceedings, and punishment for non-compliance.

19 Rules
G.S.R. 1111(E) Notification
NFRA-2 Annual return
G.S.R. 1111(E) Enacted 13 November 2018 Enforced 13 November 2018 Ministry of Corporate Affairs
Made under

The Companies Act, 2013 Chapter X

s. 132 s. 139 s. 469
19 rules
Default readable text
Opening text

Preamble

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]
GOVERNMENT OF INDIA
MINISTRY OF CORPORATE AFFAIRS
NOTIFICATION
New Delhi,13th November, 2018
G.S.R. _(E). - In exercise of the powers conferred under sub-sections (2) and (4) of section 132, sub-section (1) of section 139 and sub-section (1) of section 469 of the Companies ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013), 2013 (18 of 2013). the Central Government hereby makes the following rules, namely:-
Chapter I

Scope and Functions

5 rules
R. 1 Short title and commencement
Open rule
Short Title and Commencement - (1) These rules may be called the National Financial Reporting AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act Rules, 2018
(2) They shall come into force on the date of their publication in the Official Gazette.
R. 2 Definitions
Open rule
(1) In these rules, unless the context otherwise requires,-
(a) "accounting standardsDefined in rule 2(a): accounting standards means the 'accounting standards' as defined in clause (2) of section 2 of the Act:" means the 'accounting standardsDefined in rule 2(a): accounting standards means the 'accounting standards' as defined in clause (2) of section 2 of the Act:' as defined in clause (2) of section 2 of the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013):
(b) "ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013)" means the Companies ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013), 2013 (18 of 2013);
(c) "auditing standardsDefined in rule 2(c): auditing standards means the 'auditing standards' as defined in clause (7) of section 2 of the Act" means the 'auditing standardsDefined in rule 2(c): auditing standards means the 'auditing standards' as defined in clause (7) of section 2 of the Act' as defined in clause (7) of section 2 of the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013);
(d) "auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other..." means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013), 2008 (6 of 2009) or any other ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013) for the time being m force, who has been appointed as an auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... of a company or a body corporate under section 139 of the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013) or under any other ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013) for the time being in force;
(e) "AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act" means the National Financial Reporting AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act constituted under sub-section (1) of section 132 of the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013);
(f) "chairpersonDefined in rule 2(f): chairperson means the chairperson of the Authority" means the chairpersonDefined in rule 2(f): chairperson means the chairperson of the Authority of the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act;
(g) "DivisionDefined in rule 2(g): Division means a division 1[including the one headed by the chairperson or a full time member] established by the Authority for the purpose of organising and carrying out its functions and duties" means a divisionDefined in rule 2(g): Division means a division 1[including the one headed by the chairperson or a full time member] established by the Authority for the purpose of organising and carrying out its functions and duties 1Words ins. by G.S.R. 636(E), dated 5th September, 2019 (National Financial Reporting Authority (Amendment) Rules, 2019), w.e.f. 5th September, 2019.including the one headed by the chairpersonDefined in rule 2(f): chairperson means the chairperson of the Authority or a full-time memberDefined in rule 2(i): full time member means a member who has been appointed as such under sub section (3) of section 132 of the Act established by the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act for the purpose of organising and carrying out its functions and duties;
(h) "FormDefined in rule 2(h): Form means the Form annexed to these Rules:" means the FormDefined in rule 2(h): Form means the Form annexed to these Rules: annexed to these Rules:
(i) "full-time memberDefined in rule 2(i): full time member means a member who has been appointed as such under sub section (3) of section 132 of the Act" means a member who has been appointed as such under sub-section (3) of section 132 of the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013);
(j) "part-time memberDefined in rule 2(j): part time member means a member of the Authority other than a full time member. (2) Words and expressions used and not defined in these rules but defined in the Act shall have the same meanings respectively assigned to them in the Act. 1. Words ins. by G.S.R. 636(E), dated 5th September, 2019 (National Financial Rep..." means a member of the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act other than a full-time memberDefined in rule 2(i): full time member means a member who has been appointed as such under sub section (3) of section 132 of the Act.
(2) Words and expressions used and not defined in these rules but defined in the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013) shall have the same meanings respectively assigned to them in the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013).
1. Words ins. by G.S.R. 636(E), dated 5th September, 2019 (National Financial Reporting AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act (Amendment) Rules, 2019), w.e.f. 5th September, 2019.
R. 3 Classes of companies and bodies corporate governed by the Authority
Open rule
(1) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act shall have power to monitor and enforce compliance with accounting standardsDefined in rule 2(a): accounting standards means the 'accounting standards' as defined in clause (2) of section 2 of the Act: and auditing standardsDefined in rule 2(c): auditing standards means the 'auditing standards' as defined in clause (7) of section 2 of the Act, oversee the quality of service under sub-section (2) of section 132 or undertake investigation under sub-section (4) of such section of the auditors of the following class of companies and bodies corporate, namely:-
(a) companies whose securities are listed on any stock exchange in India or outside India:
(b) unlisted public companies having paid-up capital of not less than rupees five hundred crores or having annual turnover of not less than rupees one thousand crores or having, in aggregate. outstanding loans. debentures and deposits of not less than rupees five hundred crores as on the 31st March of immediately preceding financial year;
(c) insurance companies, banking companies, companies engaged in the generation or supply of electricity, companies governed by any special ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013) for the time being in force or bodies corporate incorporated by an ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013) in accordance with clauses (b), (c), (d), (e) and (f) of sub-section (4) of section 1 of the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013);
Explanation.- For the purpose of this clause, "banking company" includes 'corresponding new bank' as defined in clause (d) of section 2 of the Banking Companies(Acquisition and Transfer of Undertakings) ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013), 1970 (5 of 1970) and clause (b) of section 2 of the Banking Companies (Acquisition and Transfer of Undertakings) ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013), 1980 (40 of 1980) and 'subsidiary bank' as defined in clause (k) of section 2 of the State Bank of India(Subsidiary Bank) ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013), 1959 (38 of 1959)
(d) any body corporate or company or person, or any class of bodies corporate or companies or persons, on a reference made to the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act by the Central Government in public interest; and
(e) a body corporate incorporated or registered outside India, which is a subsidiary or associate company of any company or body corporate incorporated or registered in India as referred to in clauses (a) to (d), if the income or networth of such subsidiary or associate company exceeds twenty per cent. of the consolidated income or consolidated networth of such company or the body corporate. as the case may be, referred to in clauses (a) to (d).
(2) Every existing body corporate other than a company governed by these rules, shall inform the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act within thirty days of the commencement of these rules, in FormDefined in rule 2(h): Form means the Form annexed to these Rules: NFRA-1, the particulars of the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... as on the date of commencement of these rules.
(3) Every body corporate, other than a company as defined in clause (20) of section 2, formed in India and governed under this rule shall, within fifteen days of appointment of an auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... under sub-section (1) of section 139, inform the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act in FormDefined in rule 2(h): Form means the Form annexed to these Rules: NFRA-1, the particulars of the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... appointed by such body corporate:
Provided that a body corporate governed under clause (e) of sub-rule (1) shall provide details of appointment of its auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... in FormDefined in rule 2(h): Form means the Form annexed to these Rules: NFRA-1.
(4) A company or a body corporate other than a company governed under this rule shall continue to be governed by the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act for a period of three years after it ceases to be listed or its paid-up capital or turnover or aggregate of loans, debentures and deposits falls below the limit stated therein
R. 4 Functions and duties of the Authority
Open rule
(1) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act shall protect the public interest and the interests of investors, creditors and others associated with the companies or bodies corporate governed under rule 3 by establishing high quality standards of accounting and auditing and exercising effective oversight of accounting functions performed by the companies and bodies corporate and auditing functions performed by auditors.
(2) In particular, and without prejudice to the generality of the foregoing, the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act shall:-
(a) maintain details of particulars of auditors appointed in the companies and bodies corporate specified in rule 3;
(b) recommend accounting standardsDefined in rule 2(a): accounting standards means the 'accounting standards' as defined in clause (2) of section 2 of the Act: and auditing standardsDefined in rule 2(c): auditing standards means the 'auditing standards' as defined in clause (7) of section 2 of the Act for approval by the Central Government;
(c) monitor and enforce compliance with accounting standardsDefined in rule 2(a): accounting standards means the 'accounting standards' as defined in clause (2) of section 2 of the Act: and auditing standardsDefined in rule 2(c): auditing standards means the 'auditing standards' as defined in clause (7) of section 2 of the Act;
(d) oversee the quality of service of the professions associated with ensuring compliance with such standards and suggest measures for improvement in the quality of service;
(e) promote awareness in relation to the compliance of accounting standardsDefined in rule 2(a): accounting standards means the 'accounting standards' as defined in clause (2) of section 2 of the Act: and auditing standardsDefined in rule 2(c): auditing standards means the 'auditing standards' as defined in clause (7) of section 2 of the Act;
(f) co-operate with national and international organisations of independent audit regulators in establishing and overseeing adherence to accounting standardsDefined in rule 2(a): accounting standards means the 'accounting standards' as defined in clause (2) of section 2 of the Act: and auditing standardsDefined in rule 2(c): auditing standards means the 'auditing standards' as defined in clause (7) of section 2 of the Act; and
(g) perform such other functions and duties as may be necessary or incidental to the aforesaid functions and duties.
(3) The Central Government may, by notification, and subject to such conditions, limitations and restrictions as may be specified therein delegate any of its powers or functions under the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013), other than the power to make rules, to the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act.
R. 5 Annual Return
Open rule
Every auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... referred to in rule 3 shall file a return with the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act on or before 1Words subs. for "30th April every year in such form as may be specified by the Central Government" vide G.S.R. 636(E), dated 5th September, 2019 (National Financial Reporting Authority (Amendment) Rules, 2019), w.e.f. 5th September, 2019.30th November every year in FormDefined in rule 2(h): Form means the Form annexed to these Rules: NFRA-2.
1. Words subs. for "30th April every year in such formDefined in rule 2(h): Form means the Form annexed to these Rules: as may be specified by the Central Government" vide G.S.R. 636(E), dated 5th September, 2019 (National Financial Reporting AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act (Amendment) Rules, 2019), w.e.f. 5th September, 2019.
Chapter II

Standards, Monitoring and Quality

4 rules
R. 6 Recommending accounting standards and auditing standards
Open rule
(1) For the purpose of recommending accounting standardsDefined in rule 2(a): accounting standards means the 'accounting standards' as defined in clause (2) of section 2 of the Act: or auditing standardsDefined in rule 2(c): auditing standards means the 'auditing standards' as defined in clause (7) of section 2 of the Act for approval by the Central Government, the Authority-
(a) shall receive recommendations from the Institute of Chartered Accountants of India on proposals for new accounting standardsDefined in rule 2(a): accounting standards means the 'accounting standards' as defined in clause (2) of section 2 of the Act: or auditing standardsDefined in rule 2(c): auditing standards means the 'auditing standards' as defined in clause (7) of section 2 of the Act or for amendments to existing accounting standardsDefined in rule 2(a): accounting standards means the 'accounting standards' as defined in clause (2) of section 2 of the Act: or auditing standardsDefined in rule 2(c): auditing standards means the 'auditing standards' as defined in clause (7) of section 2 of the Act.
(b) may seek additional information from the Institute of Chartered Accountants of India on the recommendations received under clause (a), if required.
(2) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act shall consider the recommendations and additional information in such manner as it deems fit before making recommendations to the Central Government.
R. 7 Monitoring and enforcing compliance with accounting standards
Open rule
(1) For the purpose of monitoring and enforcing compliance with accounting standardsDefined in rule 2(a): accounting standards means the 'accounting standards' as defined in clause (2) of section 2 of the Act: under the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013) by a company or a body corporate governed under rule 3, the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act may review the financial statements of such company or body corporate, as the case may be, and if so required, direct such company or body corporate or its auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... by a written notice, to provide further information or explanation or any relevant documents relating to such company or body corporate, within such reasonable time as may be specified in the notice.
(2) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act may require the personal presence of the officers of the company or body corporate and its auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... for seeking additional information or explanation in connection with the review of the financial statements of such company or body corporate.
(3) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act shall publish its findings relating to non-complainces on its website and in such other manner as it considers fit, unless it has reasons not to do so in the public interest and it records the reasons in writing.
(4) Where the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act finds or has reason to believe that any accounting standard has or may have been violated, it may decide on the further course of investigation or enforcement action through its concerned DivisionDefined in rule 2(g): Division means a division 1[including the one headed by the chairperson or a full time member] established by the Authority for the purpose of organising and carrying out its functions and duties.
R. 8 Monitoring and enforcing compliance with auditing standards
Open rule
(1) For the purpose of monitoring and enforcing compliance with auditing standardsDefined in rule 2(c): auditing standards means the 'auditing standards' as defined in clause (7) of section 2 of the Act under the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013) by a company or a body corporate governed under rule 3, the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act may: -
(a) review working papers (including audit plan and other audit documents) and communications related to the audit;
(b) evaluate the sufficiency of the quality control system of the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... and the manner of documentation of the system by the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other...; and
(c) perform such other testing of the audit, supervisory, and quality control procedures of the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... as may be considered necessary or appropriate.
(2) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act may require an auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... to report on its governance practices and internal processes designed to promote audit quality, protect its reputation and reduce risks including risk of failure of the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... and may take such action on the report as may be necessary.
(3) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act may seek additional information or may require the personal presence of the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... for seeking additional information or explanation in connection with the conduct of an audit.
(4) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act shall perform its monitoring and enforcement activities through its officers or experts with sufficient experience in audit of the relevant industry.
(5) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act shall publish its findings relating to non-complainces on its website and in such other manner as it considers fit, unless it has reasons not to do so in the public interest and it records the reasons in writing
(6) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act shall not publish proprietary or confidential information, unless it has reasons to do so in the public interest and it records the reasons in writing.
(7) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act may send a separate report containing proprietary or confidential information to the Central Government for its information
(8) Where the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act finds or has reason to believe that any law or professional or other standard has or may have been violated by an auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other..., it may decide on the further course of investigation or enforcement action through its concerned DivisionDefined in rule 2(g): Division means a division 1[including the one headed by the chairperson or a full time member] established by the Authority for the purpose of organising and carrying out its functions and duties.
R. 9 Overseeing the quality of service and suggesting measures for improvement
Open rule
(1) On the basis of its review, the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act may direct an auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... to take measures for improvement of audit quality including changes in their audit processes, quality control, and audit reports and specify a detailed plan with time-limits.
(2) It shall be the duty of the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... to make the required improvements and send a report to the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act explaining how it has complied with the directions made by the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act.
(3) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act shall monitor the improvements made by the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... and take such action as it deems fit depending on the progress made by the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other....
(4) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act may refer cases with regard to overseeing the quality of service of auditors of companies or bodies corporate referred to in rule 3 to the Quality Review Board constituted under the Chartered Accountants ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013), 1949 (38 of 1949) or call for any report or information in respect of such auditors or companies or bodies corporate from such Board as it may deem appropriate.
(5) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act may take the assistance of experts for its oversight and monitoring activities.
Chapter III

Investigation and Discipline

4 rules
R. 10 Power to investigate
Open rule
(1) Where the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act has-
(a) received any reference from the Central Government for investigation into any matter of professional or other misconduct under sub-section (4) of section 132 of the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013);
(b) decided to undertake investigation into any matter on the basis of its compliance or oversight activities; or
(c) decided to undertake suo motu investigation into any matter of professional or other misconduct, after recording reasons in writing for this purpose,
it shall forward the matter to its DivisionDefined in rule 2(g): Division means a division 1[including the one headed by the chairperson or a full time member] established by the Authority for the purpose of organising and carrying out its functions and duties dealing with enforcement for carrying out investigation and other action.
(2) If, during the investigation, the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act has evidence to believe that any company or body corporate has not complied with the requirements under the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013) or rules which involves or may involve fraud amounting to rupees one crore or more, it shall report its findings to the Central Government.
(3) On the commencement of these rules-
(a) the action in respect of cases of professional or other misconduct against auditors of companies referred to in rule 3 shall be initiated by AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act and no other institute or body shall initiate any such proceedings against such auditors:
Provided that no other institute or body shall initiate or continue any proceedings in such matters of misconduct where the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act has initiated an investigation under this rule;
(b) the action in respect of cases of professional or other misconduct against auditors of companies or bodies corporate other than those referred to in rule 3 shall continue to be proceeded with by the Institute of Chartered Accountants of India as per provisions of the Chartered Accountants ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013), 1949 and the regulations made thereunder.
R. 11 Disciplinary proceeding
Open rule
(1) Based on the reference received from the Central Government or findings of its monitoring or enforcement or oversight activities, or on the basis of material otherwise available on record, if the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act believes that sufficient cause exists to take actions permissible under sub-section (4) of section 132, it shall refer the matter to the concerned divisionDefined in rule 2(g): Division means a division 1[including the one headed by the chairperson or a full time member] established by the Authority for the purpose of organising and carrying out its functions and duties, which shall cause a show-cause notice to be issued to the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other....
(2) The show-cause notice shall be in writing. and shall, inter alia, state-
(a) the provisions of the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013) or rules under which it has been issued;
(b) the details of the alleged facts:
(c) the details of the evidence in support of the alleged facts;
(d) the provisions of the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013), rules or the accounting standardsDefined in rule 2(a): accounting standards means the 'accounting standards' as defined in clause (2) of section 2 of the Act: or auditing standardsDefined in rule 2(c): auditing standards means the 'auditing standards' as defined in clause (7) of section 2 of the Act thereunder allegedly violated, or the manner in which the public interest is allegedly affected;
(e) the actions that the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act proposes to take or the directions it proposes to issue if the allegations are established;
(f) the time limit and the manner in which the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... is required to respond to the show-cause notice;
(g) the consequences of failure to respond to the show-cause notice; and
(h) the procedure to be followed for disposal of the show-cause notice.
(3) The show-cause notice shall enclose copies of documents relied upon and extracts of relevant portions from the report of investigation or other records.
(4) The show-cause notice shall be served on the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... in the following manner, namely -
(a) by sending it to the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... at the address provided by him or provided by the Institute of Chartered Accountants of India (if required by the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act) by registered post with acknowledgement due; or
(b) by an appropriate electronic means to the email address of the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... provided by him or it or provided by the the Institute of Chartered Accountants of India if required by the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act)
Provided that where the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... is a firm -
(a) a notice to a firm shall be deemed to be a notice to all the partners or employees of that firm as on the date of service of notice:
(b) the notice shall call upon the firm to disclose the name or names of the partner or partners concerned who shall be responsible for answering the allegations;
(c) the partner whose name is disclosed by the firm shall be responsible for answering the notice against the firm, and if no partner, whether erstwhile or present, of the firm owns responsibility for the allegations made against the firm, then the firm as a whole shall be responsible for answering the allegations, and all the partners and employees of that firm as on the date of occurrence of alleged misconduct, shall be responsible for answering the allegations.
(5) The DivisionDefined in rule 2(g): Division means a division 1[including the one headed by the chairperson or a full time member] established by the Authority for the purpose of organising and carrying out its functions and duties shall dispose of the show-cause notice within a period of ninety days of the assignment through a summary procedure as may be specified by the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act, by a reasoned order in adherence to the principles of natural justice including where necessary or appropriate an opportunity of being heard in person, and after considering the submissions, if any, made by the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other..., the relevant facts and circumstances, and the material on record.
1Provisos ins. by G.S.R. 636(E), dated 5th September, 2019 (National Financial Reporting Authority (Amendment) Rules, 2019), w.e.f. 5th September, 2019.Provided that where the disposal does not take place within the said period, the DivisionDefined in rule 2(g): Division means a division 1[including the one headed by the chairperson or a full time member] established by the Authority for the purpose of organising and carrying out its functions and duties shall record the reasons for not disposing off the show-cause notice within the said period, and the chairpersonDefined in rule 2(f): chairperson means the chairperson of the Authority, may, after taking into account the reasons so recorded, extend the aforesaid period by such additional period not exceeding ninety days as he may consider necessary:
1Provisos ins. by G.S.R. 636(E), dated 5th September, 2019 (National Financial Reporting Authority (Amendment) Rules, 2019), w.e.f. 5th September, 2019.Provided further that the chairpersonDefined in rule 2(f): chairperson means the chairperson of the Authority may, if he thinks fit, grant the said extension of period more than once.
1. Provisos ins. by G.S.R. 636(E), dated 5th September, 2019 (National Financial Reporting AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act (Amendment) Rules, 2019), w.e.f. 5th September, 2019.
(6) The order disposing of a show-cause notice may provide for-
(a) no action;
(b) caution:
(c) action tor imposing penalty against auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... under sub-clause (A) of clause (c) of sub-section (4) of section 132 or for debarring the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... from engaging as such under sub-clause (B) of clause (c) of sub-section (4) of section 132 or both.
(7) The order passed under sub-rule (6) shall not become effective until thirty days have elapsed from the date of issue of the order unless the DivisionDefined in rule 2(g): Division means a division 1[including the one headed by the chairperson or a full time member] established by the Authority for the purpose of organising and carrying out its functions and duties states otherwise in the order along with the reason for the same.
(8) The order passed under sub-rule (6) shall be served on the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... in the manner specified in sub-rule (3) and a copy of the same shall be sent
(i) in all cases to - (a) the Central Government; and (b) the Institute of Chartered Accountants of India;
(ii) in the case of a company referred to in sub-section (5) of section 139 to the Comptroller and AuditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... General of India;
(iii) in the case of a listed company to the Securities and Exchange Board of India;
(iv) in the case of a bank or a non-banking finance company to the Reserve Bank of India: I
(v) in the case of an insurance company to the Insurance Regulatory and Development AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act of India;
(vi) in case the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... is resident outside India to concerned regulator of such country;
and the same shall be published on the website of the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act.
R. 12 Manner of enforcement of orders passed in disciplinary proceedings
Open rule
(1) Where the order passed under rule 11 relates to imposition of a monetary penalty on any auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other..., the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... shall deposit the amount of penalty with the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act within thirty days of the order:
Provided that where the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... prefers an appeal against the order of the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act, it shall deposit ten per cent. of the amount of the monetary penalty with the Appellate Tribunal.
(2) If, w'thin thirty days of the order passed under rule 11, the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... neither pays the penalty nor appeals against the order, the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act shaIl without prejudice to any other action, inform about such non-compliance to every company or body corporate (including those not covered by rule 3) in which the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... is functioning as auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... and every such company or body corporate shall appoint a new auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... in accordance with the provisions of the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013).
(3) Where the order passed under rule 11 imposes a penalty on the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... or debars the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... from practice, the order shall be sent to every company or body corporate in which the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... is functioning as auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other....
(4) Where the order passed under rule 11 debars the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... from practice or the order under sub-rule (2) is passed, the order shall be sent to every company or body corporate (including those not covered by rule 3) in which the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... is functioning as auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... and every such company or body corporate shall appoint a new auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... in accordance with the provisions of the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013).
R. 13 Punishment in case of non-compliance
Open rule
1Rule 13 subs. by G.S.R. 456(E), dated 17th June, 2022 (National Financial Reporting Authority Amendment Rules, 2022), w.e.f. 17th June, 2022, for the former rule 13, which read: "13. Punishment in case of non-compliance.- If a company or any officer of a company or an auditor or any other person contravenes any of the provisions of these rules, the company and every officer of the company who is in default or the auditor or such other person shall be punishable as per the provisions of section 450 of the Act."Whoever contravenes any of the provisions of these rules, shall be punishable with fine not exceeding five thousand rupees, and where the contravention is a continuing one, with a further fine not exceeding five hundred rupees for every day after the first during which the contravention continues.
1. Rule 13 subs. by G.S.R. 456(E), dated 17th June, 2022 (National Financial Reporting AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act Amendment Rules, 2022), w.e.f. 17th June, 2022, for the former rule 13, which read: "13. Punishment in case of non-compliance.- If a company or any officer of a company or an auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... or any other person contravenes any of the provisions of these rules, the company and every officer of the company who is in default or the auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... or such other person shall be punishable as per the provisions of section 450 of the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013)."
Chapter IV

Governance and General

6 rules
R. 14 Role of chairperson and full-time member
Open rule
All matters related to, investigation, monitoring, enforcement and disciplinary proceedings shall be examined and decided by the chairpersonDefined in rule 2(f): chairperson means the chairperson of the Authority or any one or more of the fuIl-time members, acting through one of the Divisions.
R. 15 Advisory committees, study groups and task forces
Open rule
For the effective performance of its functions under the ActDefined in rule 2(b): Act means the Companies Act, 2013 (18 of 2013), the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act may constitute advisory committees, study groups and task forces.
R. 16 Financial reporting advocacy and education
Open rule
The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act shall take suitable measures for the promotion of awareness and significance of accounting standardsDefined in rule 2(a): accounting standards means the 'accounting standards' as defined in clause (2) of section 2 of the Act:, auditing standardsDefined in rule 2(c): auditing standards means the 'auditing standards' as defined in clause (7) of section 2 of the Act, auditors' responsibilities, audit quality and such other matters through education, training, seminars, workshops, conferences and publicity.
R. 17 Confidentiality and security of information
Open rule
(1) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act and all persons and organisations associated with it shall maintain complete confidentiality and security of the information provided to them for the purpose of the work of the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act.
(2) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act may enter into such contractual arrangements as may be necessary in order to maintain complete confidentiality and security of the information.
R. 18 Avoidance of conflict of interest
Open rule
(1) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act shall not enter into any contract. arrangement or relationship or participate in any event that may. or is likely to be perceived to, interfere with its ability to perform its functions and duties in an effective, fair and reasonable manner.
(2) In particular the AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act or any person associated with it shall not receive any funds, assets, donations, favours, gifts or sponsorships from any source other than the Central Government and shall not enter into any liabilities, obligations or commitments except as permitted by the Central Government.
R. 19 International associations and international assistance
Open rule
(1) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act may become a member of regional or international associations of independent audit regulators and standard-setters on such terms as it deems fit.
(2) The AuthorityDefined in rule 2(e): Authority means the National Financial Reporting Authority constituted under sub section (1) of section 132 of the Act may provide assistance to, or receive assistance from, foreign independent audit regulators in investigation of an auditorDefined in rule 2(d): auditor means an individual or a firm including a limited liability partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009) or any other Act for the time being m force, who has been appointed as an auditor of a company or a body corporate under section 139 of the Act or under any other... in accordance with Indian laws on such terms as it deems fit.