New Delhi, Sep 14 (PTI) Accounting and auditing bodies play a major role in building trust between investors and companies, and also help firms raise funds from markets, Ajay Bhushan Pandey, Chairman, National Financial Reporting Authority (NFRA), said on Wednesday.

Pandey said even though NFRA is just a three years old institution, there are global bodies such as International Financial Reporting Standards (IFRS) and Public Company Accounting Oversight Board (PCAOB) that make the job a bit easier.

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These institutions will actually help create a lot of trust and once you have the trust of people, investors -- be it retail investors, other big investors, foreign investor --the beneficiary will be the capital markets, Pandey said addressing the 19th Annual Capital Markets Conference of FICCI in a virtual session.

"It will be much easier for them (companies) to raise money through the capital market because people will have trust in those figures (audited and accounted numbers). Otherwise, if the trust is gone, no matter how much money people have, they will be very-very hesitant to invest/put their money," he said.

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The good thing is that India has adopted IFRS as an international standard for accounting and audit even though with certain deviations, the companies have been given a choice.

There is no gap as such, he said, explaining if India had a different standard then there will always be lots of disputes.

As in taxation, there are lots of disputes because different countries have different taxation systems and there are elements of cross-border transactions and other things that lead to many disputes and problems.

Any foreign investor or company who is investing here know how the investment system works here, how the accounts have to be maintained and how the auditor has to do the auditing, Pandey said.

Despite that there was a provision for NFRA in Companies Act, earlier it was not notified and was set up only in 2018, he said.

"What in NFRA we are trying to do is whenever any issues are thrown at us, we look at how internationally those deviations or violations have been looked at and then accordingly we take our view," he added.

Set up in October 2018 under the Companies Act, 2013, NFRA recommends accounting and auditing policies and standards to be adopted by companies for approval by the central government. It also monitors and enforces compliance with accounting standards and auditing standards.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)