Presentation on theme: "Financial Reporting Review Board of ICAI - An Overview."— Presentation transcript:
Financial Reporting Review Board of ICAI - An Overview
Formation of the Financial Reporting Review Board The Council of the Institute of Chartered Accountants of India constituted the Financial Reporting Review Board (FRRB) in July 2002.
Scope of FRRB Primary Activity Review of General Purpose Financial Statements of enterprises selected suo motto or as special case. Other Activities Creating awareness and understanding of compliance with ASs, SAs, Statement on CARO, 2003 and reporting obligations relevant to various enterprises among the users of Financial Statements. Conducting National Workshops / Seminars.
Enterprises within the purview of the FRRB Entities whose equity or debt securities are listed or are in the process of listing on any stock exchange, whether in India or outside India. Banks (including co-operative banks), financial institutions or entities carrying on insurance business. All commercial, industrial and business reporting entities, whose turnover (excluding other income) exceeds rupees fifty crore in the immediately preceding accounting year. Holding and subsidiary entities of any one of the above. Such other category of enterprises which in the opinion of the Board make the public interest vulnerable due to susceptibility to non- compliance of generally accepted accounting principles in the preparation and presentation of financial statements, non-compliance of the disclosure requirements prescribed by regulatory bodies, statutes and rules and regulations relevant to the enterprise and non- compliance of the reporting obligations of the enterprise and the auditor.
Review of General Purpose Financial Statements
Review of General Purpose Financial Statements and auditor ’ s Report thereon by FRRB The FRRB reviews the general purpose financial statements of certain enterprises and auditor’s report thereon with a view to determine, to the extent possible: Compliance with the generally accepted accounting principles in the preparation and presentation of financial statements; Compliance with the disclosure requirements prescribed by regulatory bodies, statutes and rules and regulations relevant to the enterprise; and Compliance with the reporting obligations of the auditor.
The FRRB may review the general purpose financial statements and the auditor’s report of the following enterprises: Enterprises selected either suo motto or Enterprises referred to it by any regulatory body like, Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority, Ministry of Company Affairs, etc or Enterprises wherein serious accounting irregularities have been highlighted by the media reports. Selection of Enterprises for Review
Suo motto Selection Procedure Criteria based on factors like Industrial Classification Networth Random Sampling Method Avoiding Enterprises that have been reviewed during last five years
Status of Review of General Purpose Financial Statements to be conducted during the CY During the Council Year , the Board has undertaken the review of general purpose financial statements of the financial year as follows: Selected Suo motto – 76 enterprises have been selected for review purpose. Special cases – As referred to FRRB from time to time. To complete the review of 259 enterprises, which were selected either on suo motto basis or as a Special Case during the previous Council Year(s)
Special Cases-as referred to FRRB As a proactive measure, the Board has undertaken review of financial statement of enterprises like Satyam Computers Limited, various IPL franchisees, with a view to find out the performance of auditor while certifying the financial statements and also to see the compliance with the reporting requirements of various applicable statues, Accounting Standards and Auditing Standards.
Obtaining the financial statements selected for review: It is generally obtained either by writing directly to the enterprise concerned or from other reliable sources like Stock Exchanges / Registrar of Companies. Conducting Review: Stage I: by a single Chartered Accountant, Technical Reviewer. Stage II: by a group of Chartered Accountants, at a city level, Financial Reporting Review Group. Stage III: by the Board. Procedure for Review
Eligibility Criteria For Technical Reviewers: -Chartered Accountants possessing minimum ten years experience of audit and they are either currently active in the practice of accounting and auditing or they are in Industry having comparable experience in the fields of Accounting and Auditing. Empanelment Application Form -http:// /18313empanelmentformfrrb.p dfhttp:// /18313empanelmentformfrrb.p df
Action, if any, Non-Compliance observed: In case, the FRRB finds any non-compliance, it is classified in the following categories: Non-compliance, not so material Material Non-compliance In cases where non-compliances, not so material, are observed by the Board which do not affect the true and fair view of financial statements, the FRRB would appropriately bring the non-compliance to the attention of the auditor. Procedure for Review
In cases where material non-compliance are observed by the Board which affects the true and fair view of financial statements, it may Action against the Auditor(s): refer the case to the Director (Discipline) of the Institute of Chartered Accountants of India for initiating action against the auditor under the Chartered Accountants Act, Action against the Enterprise: Insofar as the management of the enterprise is concerned, pending the grant of relevant powers to the FRRB by the Government of India, the FRRB would inform irregularity to the regulatory body relevant to the enterprise. Procedure for Review
Creating awareness and understanding of Reporting requirements among users of Financial Statements Publication in the Journal : To publish educative article on the major non compliances observed in the review process and also host a list of non compliances on the website of the Institute without disclosing identity. Publication: The Board has released a Publication ‘A Study on compliances of Financial Reporting Requirements.’
Conducting Seminars/Training Programmes/Workshops The Board conducts various Seminars/ Training programmes/ Workshops at various regional branches to impart training to the members of the Institute for review of the general purpose financial statements of the enterprises and finally to empanel them with the Board. Till date, FRRB has conducted 34 Training Programmes as well as Seminars and workshops wherein 3276 participants have been trained.
Statistics - Review of General Purpose Financial Statements So far, the FRRB has selected 418 enterprises for review, out of which 101 cases have been referred to the Director (Discipline) of the Institute and/ or to the relevant regulators and for 275 cases appropriate note on non-compliances have been issued to the auditors of the enterprises which have been observed by the Board during the review of the financial statements of such enterprises.
Number of Technical Reviewers Empanelled with FRRB Till date 364 Technical Reviewers are empanelled on the Board. Efforts are being made to classify them on the basis of their expertise area so that over the time the Board may have Industry Specific Experts with it.
New initiative taken by SEBI, wherein services of FRRB of ICAI are being utilized Recently, SEBI has set up a new Qualified Audit Review Committee (QARC) to enhance the quality of financial reporting by listed entities. This Committee would review qualified audit reports of listed enterprises as referred to it by stock exchanges. Considering FRRB as an effective mechanism Securities and Exchange Board of India (SEBI) has also sought support from ICAI’s FRRB to assess the materiality of the qualification contained in auditor’s report, based on which QARC may direct the entity to restate its books of accounts.
Appointment of ICAI Representative as Chairman of Qualified Audit Review Committee The SEBI has decided to appoint the representative from ICAI as the Chairman of the Qualified Audit Review Committee of SEBI which would also include representatives of BSE, NSE, MCX and SEBI itself. Accordingly, Chairman, Financial Reporting Review Board has been appointed as Chairman of the Committee.
HOW TO VISIT FRRB PAGE ON ICAI WEBSITE? The FRRB can be reached through the website – 69&c_id=61.