FAQ about the Financial Reporting Review Board

Question 1
What is Financial Reporting Review Board?

Reply
Financial Reporting Review Board (FRRB or the Board) is a non-standing committee of the Council of the Institute of Chartered Accountants of India. The FRRB was constituted by the Council at its 226th meeting held in July 2002.

Question 2
What is the objective of constituting the Board?

Reply
The Institute of Chartered Accountants of India is a body constituted under the Chartered Accountants Act, 1949 to regulate the profession of chartered accountants in India. The Institute, since its constitution in 1949, has made sincere efforts to improve the financial reporting practices prevailing in the Country. The Institute had, in the year 1977, constituted the Accounting Standards Board (ASB) to formulate the accounting standards to be used in the preparation and presentation of general-purpose financial statements. The Institute also constituted, in 1982, the Auditing Practices Committee {now known as the Auditing and Assurance Standards Board (AASB)}. Continuing with its commitment to serve the nation, the Council of the Institute has constituted the Financial Reporting Review Board. The objective of the Board is to review the compliance, inter alia, with the accounting and auditing standards issued by the ASB and AASB of the Institute of Chartered Accountants of India. It is envisaged that the reviews carried out by the Board, in the long-run would improve the overall quality of works executed by the members of the profession. The Board, however, restricts its reviews to the published general-purpose financial statements only. It is also clarified here that the reviews by the Financial Reporting Review Board would not be verification of the entire audit (re-audit) or review of working papers of the auditors concerned.

Question 3
What is the scope and functions of the Board?

Reply
The FRRB reviews the general-purpose financial statements of certain enterprises 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 enterprise as well as the auditor.


Question 4
How does the Board select the enterprises whose financial statements are to be reviewed?

Reply
The FRRB reviews the general-purpose financial statements either suo motto or on a reference made to it by any regulatory body like, Reserve Bank of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority, Ministry of Corporate Affairs etc. The FRRB also reviews the general-purpose financial statements of enterprises relating to which serious accounting irregularities in the general-purpose financial statements have been highlighted by the media reports.

Question 5
What are the implications of the findings made by the Board?

Reply
Findings of the FRRB relating to non-compliance with the factors stated at question number 3 above would form the basis for initiating action against the auditor under the Chartered Accountants Act, 1949. As far 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 consider informing the irregularity to the regulatory body relevant to the enterprise.

Question 6
What kinds of enterprises are within the purview of the Board?

Reply
The enterprises within the purview of the FRRB include:

  • 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.


Question 7
What action does the Board take, when it finds that there are accountings, auditing or other issues which are required to be clarified for improved compliance?

Reply
There could be accounting and auditing issues that may require a clarification. The FRRB does not have any power to issue such clarifications. However, if the FRRB is of the opinion that the issue requires a clarification, it may refer the issue to the appropriate committee of the Council for consideration.