HC rules NFRA can probe audits before its creation

New penalties can't be imposed, court order adds

- MANU KAUSHIK

The Telangana High Court's recent ruling that the National Financial Reporting Authority (NFRA) can investigate chartered accountants for audits conducted before its formation in October 2018 would strengthen the hands of the regulator. The order makes it clear that NFRA could take definitive action against errant auditors, even in past cases. However, the ruling prevents the NFRA from imposing penalties higher than those prescribed in the period when the lapse occurred.

Experts said the HC order allows NFRA to look into audit lapses in a whole lot of old cases and increases the scrutiny risks for auditors. Even high-profile cases like IL&FS and DHFL could feel the impact.