The National Financial Reporting Authority (NFRA) is one of the most important regulatory bodies governing accounting and auditing standards in India. For businesses, auditors, and finance professionals, understanding NFRA is critical to staying compliant and avoiding penalties.
In this updated 2025–2026 guide, we simplify NFRA, its functions, responsibilities, and why it matters for financial reporting in India.
What Is NFRA?
The National Financial Reporting Authority (NFRA) is an independent regulatory body established under Section 132 of the Companies Act, 2013.
Its purpose is to:
- Regulate accounting standards
- Oversee audit quality in India
- Ensure transparency and reliability in financial reporting
- Monitor professionals associated with Chartered Accountancy
NFRA acts as a watchdog to maintain high-quality financial reporting and safeguard public interest.
Why Was NFRA Established?
Several corporate frauds and financial irregularities created the need for a stronger, independent regulator.
NFRA was introduced to:
- Strengthen audit oversight
- Reduce accounting manipulation
- Improve trust in corporate reporting
- Enforce compliance more strictly than earlier systems
NFRA works similarly to global bodies like PCAOB (USA) and FRC (UK).
Who Falls Under NFRA’s Jurisdiction?
NFRA regulates:
- Listed companies
- Large unlisted public companies (threshold-based)
- Financial institutions
- Insurance companies
- Banking companies
- Any company referred by the Central Government
- Chartered Accountants & audit firms involved with these entities
Small private companies do NOT fall under NFRA.
Key Functions of NFRA
1. Setting Accounting & Auditing Standards
NFRA recommends and enforces standards that ensure accuracy, transparency, and comparability.
2. Monitoring Audit Quality
Performs quality reviews of audit reports to detect deficiencies and improve audit reliability.
3. Enforcing Compliance & Taking Disciplinary Action
NFRA has the power to penalize:
- Audit firms
- Chartered Accountants
- Company officers
for misconduct or negligence.
4. Advising the Government
NFRA provides expert recommendations on accounting and auditing reforms.
Powers of NFRA (Simplified)
NFRA can:
- Inspect audit firms
- Demand documents and records
- Investigate professional misconduct
- Impose monetary penalties
- Debar auditors from practice for up to 10 years
This makes NFRA one of India’s strongest financial regulatory bodies.
Benefits of NFRA for Businesses & Investors
- Increased transparency
- Improved investor confidence
- Higher audit quality
- Reduced corporate fraud
- More reliable financial reporting
NFRA helps build a trustworthy financial ecosystem.
NFRA Filing & Reporting Requirements (2025–2026)
Companies regulated by NFRA must:
- File financial statements on time
- Ensure audits follow specified standards
- Comply with accounting guidelines
- Respond to NFRA queries and investigations
- Maintain documentation for audits and compliance
Failure to comply can lead to strict penalties.
NFRA vs ICAI: What’s the Difference?
| NFRA | ICAI |
|---|---|
| Regulatory body | Professional body |
| Oversees audit quality | Provides education, training |
| Can penalize/debar auditors | Limited disciplinary powers |
| Independent from profession | Governed by CA community |
NFRA ensures independent oversight beyond ICAI’s internal systems.
Common FAQs about NFRA
1. Does NFRA regulate small companies?
No — private and small companies generally fall under ICAI’s supervision.
2. Can NFRA penalize audit firms?
Yes, including bans and monetary penalties.
3. Is NFRA applicable to startups?
Only if they meet public company thresholds.
Final Thoughts
NFRA plays a crucial role in ensuring credible and transparent financial reporting in India. With stricter oversight and stronger enforcement mechanisms, businesses and auditors must stay updated on NFRA guidelines to remain compliant.
For professional accounting, auditing, and compliance support, Shamiequi Books provides expert guidance with complete confidentiality and accuracy.
