BackSupreme Court to hear NFRA jurisdiction dispute on 13 October
NFRA’s statutory oversight is critical for ensuring the credibility of financial statements and good corporate governance
PremiumNew Delhi: The Supreme Court will on 13 October hear audit watchdog National Financial Reporting Authority’s (NFRA) appeal against a Telangana high court order which stayed proceedings against an audit firm, saying the regulator, at first impression, does not have powers over audits conducted earlier.
The apex court’s order on Friday to issue notice to the audit firm P. Murali & Co. and to hear the audit watchdog’s plea next month suggests that the issue of jurisdiction of NFRA over audits conducted before the regulator’s creation will be settled at the highest level. The apex court order is posted on its website.
NFRA was set up on 1 October 2018.
The challenge to the regulator’s retrospective jursidiction arose from petitions filed by audit firms in various courts including the one on which the Telangana high court gave its prima facie opinion.
Mint reported on 13 July that the Supreme Court had dismissed a petition raising questions on the watchdog’s retrospective jurisdiction in another case and that the regulator was set to clarify about its statutory powers as per a direction from the Bombay high court.
Emails sent on Monday to NFRA and to P. Murali & Co. seeking comments for the story remained unanswered at the time of publishing.
The apex court's decision to quickly take up the regulator’s petition highlights the urgent need to settle the matter given that NFRA’s statutory oversight is critical for ensuring the credibility of financial statements and good corporate governance. The matter is significant because some of the regulatory action taken by NFRA pertains to the financial years prior to its creation. Policy makers want a robust regulatory architecture governing statutory audits of companies as the country’s potential to attract investments hinges on the transparency and credibility of the financial statements of companies.
The Telangana high court in its order last month said that the regulator took action retrospectively in regard to the audits conducted prior to year 2018 and stayed certain proceedings.
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