UPSC (2026) Practice MCQs on NFRA (Answers at the end)

 

UPSC (2026) Practice MCQs on NFRA

(Answers at the end)

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Q1. With reference to the National Financial Reporting Authority (NFRA), consider the following statements:

1. It was established under the Companies Act to oversee compliance with accounting and auditing standards for listed companies in India.

2. It has the power to investigate auditors of both public and private companies of any size.

3. It can impose penalties and debar auditors found guilty of professional misconduct.

Which of the statements given above is/are correct?

(a) 1 only

(b) 1 and 3 only

(c) 2 and 3 only

(d) 1, 2 and 3

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Q2. Consider the following:

1. Expected Credit Loss (ECL) under Ind AS 109

2. Revenue recognition over time under Ind AS 115

3. Impairment testing under Ind AS 36

Which of the above involve significant management judgement and estimation uncertainty that require heightened auditor scepticism?

(a) 1 and 2 only

(b) 1 and 3 only

(c) 2 and 3 only

(d) 1, 2 and 3

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Q3. In the context of India’s financial reporting reform ecosystem, NFRA’s Webinar Series 2025–26 primarily contributes to:

1. Capacity-building among small and medium audit practitioners

2. Harmonisation of Indian financial reporting with global benchmarks

3. Investigation of accounting frauds in real time

4. Strengthening the preparer–auditor communication loop

Select the correct answer using the code below:

(a) 1, 2 and 4 only

(b) 1 and 3 only

(c) 2 and 3 only

(d) 1, 2, 3 and 4

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Q4. Which of the following best describes the regulatory character of NFRA’s outreach programmes such as audit workshops, toolkits, and webinars?

(a) They form part of NFRA’s statutory adjudication mechanism.

(b) They are non-enforcement tools aimed at improving audit quality through knowledge diffusion.

(c) They are mandatory continuing education programmes under the Companies Act.

(d) They replace the role of the Institute of Chartered Accountants of India (ICAI) in training auditors.

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Q5. With reference to India International Trade Fair (IITF), consider the following statements:

1. It serves as a platform for MSMEs, artisans, and exporters to access both domestic and international markets.

2. Participation of States and Union Territories reflects competitive federalism in economic development.

3. IITF is organised annually by the Export Promotion Council of India.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 only

(c) 2 and 3 only

(d) 1, 2 and 3

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Q6. In the context of trade fairs like IITF, which of the following outcomes most directly contribute to inclusive growth?

1. Visibility for GI-tagged traditional crafts

2. Income stability for small producers through concentrated sales

3. Long-term buyer–seller relationships

4. Subsidised credit support from NABARD during the fair

Select the correct answer:

(a) 1, 2 and 3 only

(b) 1 and 4 only

(c) 2, 3 and 4 only

(d) 1, 2, 3 and 4

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Q7. Which of the following best explains why NFRA’s webinars focus heavily on judgment-based accounting areas like impairment and ECL?

(a) These are statutory requirements unique to India and absent in IFRS.

(b) These areas show the lowest risk of material misstatements in corporate reporting.

(c) Misjudgements in these areas can significantly distort financial statements and conceal losses.

(d) These topics are mandated by SEBI for quarterly filings of all companies.

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Q8. Consider the following regarding trade fairs as instruments of economic diplomacy:

1. They help India showcase soft power through cultural goods like handicrafts.

2. They create stable global market linkages by attracting recurring foreign participants.

3. They function as preferential trade agreement platforms between countries.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 1 only

(c) 2 and 3 only

(d) 1, 2 and 3

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Q9. With reference to NFRA’s jurisdiction and powers, which of the following entities fall within its supervisory domain?

1. Auditors of listed companies

2. Auditors of large unlisted public companies

3. Auditors of all private companies below a certain turnover threshold

4. Auditors of insurance companies and banking companies

Select the correct answer using the code below:

(a) 1, 2 and 4 only

(b) 1 and 2 only

(c) 3 and 4 only

(d) 1, 2, 3 and 4

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Q10. The presence of international exhibitors at IITF—such as artisans from Egypt, Thailand and Turkey—primarily indicates:

(a) India’s shift toward a protectionist trade policy

(b) Weakness of India’s domestic manufacturing ecosystem

(c) India emerging as a reliable and profitable consumer market

(d) Dependence of foreign artisans on export subsidies provided by the Indian government

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Answer Key (with brief logic)

1. (b) – NFRA covers listed + certain large public companies; cannot investigate all private companies.

2. (d) – All three require high judgement.

3. (a) – Focus is capacity-building, global alignment, and improved communication.

4. (b) – They are soft regulatory tools.

5. (a) – Organised by ITPO, not EPC.

6. (a) – NABARD subsidies are not part of IITF.

7. (c) – These areas can hide losses if misapplied.

8. (a) – PTAs are not negotiated at such fairs.

9. (a) – NFRA oversees listed, large unlisted public, and some financial-sector auditors.

10. (c) – Their recurring participation = India is a strong market.