Annual Return prescribed for the Auditors which are governed by the NFRA

Ministry of Corporate Affairs (MCA) has amended National Financial Reporting Authority (NFRA) Rules, 2018 vide notification dated 5 September, 2019 has prescribed the form NFRA-2 as the Annual Return which is to be filed by the auditor governed by the NFRA authority. The form NFRA-2 is to be filed by 30 November (Earlier it was 30 April) every year.

The details required under Form NFRA-2 are as follows:

1. Details of Auditors:

a) Details of Auditor (Registration no., PAN, Details of auditors registration no., etc)

b) Partners and employees of the auditor

• No. of partners
• Details of Partners i.e. Name, registration no., name of every firm or auditor in which the person is partner
• Total no. of CA or its equivalent employed by auditor

c) Details of the Auditor affiliations with any network or Similar Arrangements of the Auditor

*d) General Information

• Jurisdictional information of auditor where the auditor is registered
• Description of the audit supervisory process undertaken by regulator which overseas auditor performing audit
• Auditor subjected to quality control review by any regulator in the relevant jurisdiction, if yes, details of same such as rating, adverse remarks by regulator etc
• Auditor subjected to any other review by any regulator if yes, details of same

e) Quality Control policies of the Auditor during the audit

f) Details of disciplinary or other proceedings initiated against the auditor such as Name of regulator/agency that has initiated action Brief description of the same

g) Details of Special Circumstances during past 3 years if any, such as Resignation/withdrawal of audit report

2. Details of audit clients and Auditors Report:

Details of audit clients and audit reports of the auditor for companies/body corporates covered under Rule 3(1)(a) to (e)

• Basic KYC details such as Name of the Company, CIN etc
• Fees received by auditor in INR or rate of conversion used (Categories – Statutory audit services, tax audit and other taxation services, attestation and certification services, non-audit services, out of pocket expenses)
• Details of Findings in auditors report – Unfavourable/qualified
• Report modified or not
• Opinion on any specified matter which auditor unable to express in the Auditors report

In addition to above, the following additional information is also required for material subsidiary/associate company as referred in Rule 3(1)(e)

*A) General Information

•  Jurisdictional information of auditor where the auditor is registered 
•  Auditor  subjected to quality control review by any regulator in the relevant jurisdiction, if yes, details of same such as rating, adverse remarks by regulator etc.
• Auditor  subjected to any other review by any regulator if yes, details of same  

B) Audit Clients and Audit reports of the auditor 

a) CIN and name of Indian company/body corporate

b) Name and LLPIN/Registration no. of Audit firm who issue audit report to Indian company/body corporate
c) Whether GAAS have been followed, if not name of the auditing standards followed?
d) Whether GAAP have been followed, if not name of the accounting standards followed?
e) Consolidated income/net worth of the Indian company/overseas subsidiary/associate

3. Consent of the Auditor: Consent to co-operate and comply with any request for information/production of documents made by NFRA

4. Classes of Companies governed by the NFRA Authority:

For the ease of reference, the classes of companies which are governed by the NFRA as provided in rule 3 of the NFRA rules are as follows:

• Listed Companies (Rule 3(1)(a))
• Unlisted Public Companies having paid up capital >= 500 crore OR turnover >= 1000 crores OR aggregate o/s loan + Debenture + Deposit >=500 crores as on 31 March of immediately preceding FY (Rule 3(1)(b))
• Insurance Companies (Rule 3(1)(c) )
• Banking companies (Rule 3(1)(c) )
• Companies engaged in the generation or supply of electricity (Rule 3(1)(c) )
• Companies governed by Special Act (Rule 3(1)(c) )
• Body corporate which has been referred by the CG (Rule 3(1)(d))
• Body corporate incorporated or registered outside India – which is material subsidiary/ associate company of any company or body corporate incorporated or registered in India as referred in clause (a) to (d) of Rule 3 (i.e. Income /networth of such subsidiary/ associate company >20% of consolidated income /networth of company/body corporate as the case may be) (Rule 3(1)(e))

In case of failure to comply with the rules, the auditor shall be punishable as per the provisions of section 450 of the Companies Act, 2013 which states fine up to Rs. 10,000 and in case contravention is continuing one Rs. 1000 per day after the first during which the contravention continues

*P.S. Pursuant to the Gazetted copy of Notification amending NFRA rules, 2018, there is a slight change in point 3 of the form NFRA 2. The details of jurisdictional information of auditor is required to be given only by the auditors for the companies covered in Rule 3(1)(e).  

Gazette Notification link is as follows:
http://egazette.nic.in/WriteReadData/2019/212306.pdf