Section 132 — Constitution of National Financial Reporting Authority

(1) The Central Government may,
by notification, constitute a National Financial Reporting Authority to provide for ma tters relating to
accounting and auditing standards under this Act.
1[(1A) The National Financial Reporting Authority shall perform its functions through such divisions
as may be prescribed.]
(2) Notwithstanding anything contained in any other law for the time being in force, the National
Financial Reporting Authority shall—
(a) make recommendations to the Central Government on the formulation and laying down of
accounting and auditing policies and standards for adoption by companies or class of companies o r
their auditors, as the case may be;
(b) monitor and enforce the compliance with accounting standards and auditing standards in such
manner as may be prescribed;
(c) oversee the quality of service of the professions associated with ensuring compliance with such
standards, and suggest measures required for improvement in quality of service and such other related
matters as may be prescribed; and
(d) perform such other functions relating to clauses (a), (b) and (c) as may be prescribed.
(3) The National Financial Reporting Authority shall consist of a chairperson, who shall be a person of
eminence and having expertise in accountancy, auditing, finance or law to be appointed by the Central
Government and such other members not exceeding fifteen consisting of part-time and full-time members
as may be prescribed:
Provided that the terms and conditions and the manner of appointment of the chairperson and members
shall be such as may be prescribed:
Provided further that the chairperson and members shall make a declaration to the Central Government
in the prescribed form regarding no conflict of interest or lack of independence in respect of his or their
appointment:
Provided also that the chairperson and members, who are in full -time employment with National
Financial Reporting Authority shall not be associated with any audit firm (including related consultancy
firms) during the course of their appointment and two years after ceasing to hold such appointment.
1[(3A) Each division of the National Financial Reporting A uthority shall be presided over by the
Chairperson or a full-time Member authorized by the Chairperson.

1. Ins. by Act 22 of 2019, s. 20 (w.e.f. 15-8-2019).

(3B) There shall be an executive body of the National Financial Reporting Authority consisting of the
Chairperson and full -time Members of such Authorit y for efficient discharge of its functions under
sub-section (2) [other than clause (a) and sub-section (4).]
(4) Notwithstanding anything contained in any other law for the time being in force, the National
Financial Reporting Authority shall—
(a) have the power to investigate, either suo motu or on a reference made to it by the Central
Government, for such class of bodies corporate or persons, in such manners may be prescribed into the
matters of professional or other misconduct committed by any member or firm of chartered accountants,
registered under the Chartered Accountants Act, 1949 (38 of 1949):
Provided that no other institute or body shall initiate or continue any proceedings in such matters
of misconduct where the National Financial Reporting Authority has initiated an investigation under
this section;
(b) have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908
(5 of 1908), while trying a suit, in respect of the following matters, namely:—
(i) discovery and production of books of account and other documents, at such place and at
such time as may be specified by the National Financial Reporting Authority;
(ii) summoning and enforcing the attendance of persons and examining them on oath;
(iii) inspection of any books, registers and other documents of any person referred to in clause
(b) at any place;
(iv) issuing commissions for examination of witnesses or documents;
(c) where professional or other misconduct is proved, have the power to make order for—
(A) imposing penalty of—
(I) not less than one lakh rupees, but which may extend to five times of the fees received,
in case of individuals; and
(II) not less than 1[five lakh rupees], but which may extend to ten times of the fees received,
in case of firms;
2[(B) debarring the member or the firm from—
I. being appointed as an auditor or internal auditor or undertaking any audit in respect t of
financial statements or internal audit of the functions and activities of any company or body
corporate; or
II. performing any valuation as provided under section 247,
for a minimum period of six months or such higher period not exceeding ten years as may be
determined by the National Financial Reporting Authority.]
Explanation.—For the purposes of this sub-section, the expression “professional or other misconduct”
shall have the same meaning assigned to it under section 22 of the Chartered Accountants Act, 1949 (38
of 1949).
(5) Any person aggrieved by any order of the National Financial Reporting Auth ority issued under
clause (c) of sub-section (4), may prefer an appeal before 3[the Appellate Tribunal in such manner and on
payment of such fee as may be prescribed].
4* * * * *
(10) The National Financial Reporting Authority shall meet at such times and places and shall observe
such rules of procedure in regard to the transaction of business at its meetings in such manner as may be
prescribed.

1. Subs. by Act 1 of 2018, s. 35, for “ten lakh rupees” (w.e.f. 9-2-2018).
2. Subs. by Act 22 of 2019, s. 20, for sub-clause (b) (w.e.f. 15-8-2019).
3. Subs. by s. 35, ibid., for “the Appellate Authority constituted under sub-section (6) in such manner as may be prescribed” (w.e.f.
9-2-2018).
4. Sub-sections (6), (7), (8) and (9) omitted by s. 35, ibid. (w.e.f. 9-2-2018).

(11) The Central Government may appoint a secretary and such other employees as it may consider
necessary for the efficient performance of functions by the National Financial Reporting Authority under
this Act and the terms and conditions of service of the secretary and employees shall be such as may be
prescribed.
(12) The head office of the National Financ ial Reporting Authority shall be at New Delhi and the
National Financial Reporting Authority may, meet at such other places in India as it deems fit.
(13) The National Financial Reporting Authority shall cause to be maintained such books of account
and other books in relation to its accounts in such form and in such manner as the Central Government may,
in consultation with the Comptroller and Auditor-General of India prescribe.
(14) The accounts of the National Financial Reporting Authority shall be audite d by the Comptroller
and Auditor-General of India at such intervals as may be specified by him and such accounts as certified
by the Comptroller and Auditor-General of India together with the audit report thereon shall be forwarded
annually to the Central Government by the National Financial Reporting Authority.
(15) The National Financial Reporting Authority shall prepare in such form and at such time for each