Tuesday, February 15, 2011

CA PROFESSION READY FOR THE FUTURE CHALLENGES

The profession of Chartered Accountancy is facing new challenges yet see more opportunities as the
economic and regulatory scenario in India is changing very fast. The ICAI and various CA associations / societies are preparing the membership mentally and technically for the changing scenario.

Transparency and Integrity

The profession of Chartered Accountants is committed to remain completely transparent while reporting on true and fair presentation of financial statements by the corporates and to deal with financial matters as consultants with integrity and ethics.

It is well established that corruption is the root cause for failure of efforts by the state to have inclusive growth. The Chartered Accountants are committed not to be party to the corruption and to help eradicate corruption from public life, day today business operations and other dealings within and outside the business organizations and among all the stakeholders. Strengthening accounting standards requiring crucial disclosures and strict auditing standards requiring extensive checking and true reporting are the ongoing efforts made by the profession to prove its point in this regard. Preparing memebership to conduct social audit is another important initiative by the regulatory body of the profession in this direction.

ICAI has offered to the Union Finance Minister to take support of the profession in structuring internal control procedures, delegation of authority and business processes in such a manner that corruption is significantly prevented in all government spending.

IFRS

IFRS shall go a long way in preparation and presentation of financial statements by corporates. The ICAI has already gone through convergence process and the IND AS (equivalent to IFRS) have already been submitted to the government after due consideration by the NACAS. Before these are
implimented, a lot of changes are required to be made in legal framework governing the corporate world. The government has announced 1st April, 2011 as the date to implement phase-1 of IND AS to a selective list of corporates. The CA profession has already trained 50000 plus CAs in various cities for the new Accounting System. However, the government has neither notified the revised IND AS nor has taken any action to bring changes in the relevant laws and regulations. The government should at least give a minimum one year notice before implementing the new system and method. The government can not be permitted to declare a date without even finalizing the text of the law to be followed by companies.

Companies Bill

The Companies Bill, 2009 has already undergone a large number of changes arising out of Parliamentary Committees deliberation, changes proposed by MCA and reactions from industries, businesses and professional bodies. The Government should again expose final draft of the Bill for
public comments. It is a high time, the government should take its best effort to clear passing the Companies bill the coming session of the Parliament.

GST

The Goods and Services Tax law does not seem to be taking shape in the absence of a political will consensus within state Governments. The concept of having 2 separate GST without adjustment between State GST and Central GST will adversely impact the concept of eradication of cascading
effect. The government need to consider that at least State GST credit may be allowed to be set-off against the Central CST liability. If the State Governments are not agreeing to the concept at least one way fungeability may be agreed to by the Central Government to make the concept viable and workable.

Direct Tax Code

The Direct Tax Code, as originally drafted by a team appointed by the then Finance Minister has already been completely diluted. The government may consider as to whether it will be enough to bring in necessary changes in the Income Tax Act, 1961 itself to bring in necessary concept and law on which consensus is achieved in the Direct Tax Code discussion.

Bank Audit Allotment

The Reserve Bank of India did not agree to centralized appointment of bank branches auditors and delegated the same to the respective banks. In case of appointment of Central Statutory Auditors, the RBI has provided names of two CA firms to provide option to each of the appointing banks. The system of appointment of auditors by the banks is moving towards pleasing the appointing authority, thereby severely impacting the independence and financial disciplines of the banking sector. The government and RBI need to reconsider the decision otherwise they alone will be responsible for the fall in the financial discipline and resultant failure of regulatory framework in the public sector banks.

Audit of NAREGA

In terms of the latest published report the entire expenses incurred by the government on NAREGA have been incurred without any free and fair audit. There is no detailed internal control procedure or proper delegation of powers. The necessary checks and balances to ensure that the payments have been made only against the actual work done need to be put in place and be subjected to an  independent audit. Mechanism of performance audit is also required to be put in place to ensure achieving the objectives of the scheme. Absence of audit is a serious lapse and may result into grave misuse of financial resources of the government considering that more than Rs. 1 lakh crore has been
spent on NAREGA in the current year. Similarly there are number of social welfare schemes for which subsidies/ huge sums of monies are spent by the Government. This all has been done without adequate procedure, delegation of authority and a detailed audit and compliance of various guidelines.

The profession of Chartered Accountants is ready to meet any challenge and to provide support to the government and other stakeholders in respect of the aforesaid matters in the most efficient and transparent manner.

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