January 2019

EXTERNAL AUTHORITY FOR DISCIPLINARY ACTION AGAINST AUDITORS

P.N. Shah
Chartered Accountant

1.  Introduction 


At present the Council of the Institute of Chartered Accountants of India (ICAI) has power to ensure that its members maintain discipline while discharging their professional and other duties. Sections 21, 21A to 21D of the Chartered Accounts Act (CA Act) provide for mechanism for conducting Disciplinary proceedings and for awarding punishment to erring members of ICAI. Sections 22,22A to 22G of CA Act provide for filing appeals before the Appellate Authority appointed u/s. 22. The First schedule to the CA Act gives a list of Professional Misconduct by members in their dealings with other members of ICAI or with the Institute. The Second Schedule to the Act gives a list of Professional Misconduct by members in practice in their dealings with their clients.  Section 132 of the Companies Act, 2013 (Act), which has now come into force provides for constitution of a “National Financial Reporting Authority” (NFRA). By a Notification dated 21.03.2018 the Central Government has notified the constitution of NFRA. U/s. 132 of the Act, NFRA is authorised to recommend to the Central Government to notify Accounting and Auditing Standards as well as to take disciplinary action against Auditors of some specified companies and bodies corporate. This action can be taken against the Firms of Auditors as well as against partners of the Firm. Thus an External Authority is now set up to take disciplinary action against Auditors of specified entities.  The existing powers of the Council of ICAI to take disciplinary action against such Auditors is now taken away and entrusted to the NFRA.  However, ICAI will continue to have powers regarding disciplinary matters in cases of Auditors of entities other than specified entities.

 

The National Financial Reporting Authority Rules, 2018, have been notified on 13th November, 2018. These Rules have come in

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