Module: | SEBI LODR & Corporate Governance Frameworks
Q12: Consider the following statements regarding the jurisdiction of the National Financial Reporting Authority (NFRA) over unlisted public companies in 2025:
1. NFRA has the authority to investigate the auditors of unlisted public companies having a paid-up capital of Rupees 500 Crore or more.
2. An unlisted public company with an annual turnover of Rupees 1000 Crore or more falls strictly under NFRA jurisdiction.
3. Once an unlisted company falls under NFRA jurisdiction, it remains under its purview for a continuous period of five years even if it falls below the financial thresholds in subsequent years.
Which of the above statements is/are incorrect?
2. An unlisted public company with an annual turnover of Rupees 1000 Crore or more falls strictly under NFRA jurisdiction.
3. Once an unlisted company falls under NFRA jurisdiction, it remains under its purview for a continuous period of five years even if it falls below the financial thresholds in subsequent years.
Which of the above statements is/are incorrect?
✅ Correct Answer: C
🎯 Quick Answer:
C. Only 3 is incorrect.Structural Breakdown: Statement 1 is correct.
Statement 2 is correct.
Statement 3 is incorrect; the rules dictate that a company remains under NFRA purview for three years after it ceases to meet thresholds.
Historical/Related Context: NFRA took over the disciplinary powers previously held by the ICAI for large corporations following systemic failures like IL&FS.
Causal Reasoning: The three-year trailing jurisdiction rule prevents companies from managing balance sheets to escape scrutiny.