CA TUSHAR DOCTOR
Cosy relationship between management & auditors of a company is the key to accounting frauds. To tackle this issue the government is creating a new quasi judicial body National Financial Reporting Authority (NFRA), which would look after the quality of audit, compliance by auditors as also the disclosures that they make.
The Bill for NFRA is already passed in Lok Sabha and is placed in Rajya Sabha to be passed by the Members of Parliament (MP).
NFRA plans to take away powers of ICAI to set accounting standards & to take disciplinary action against its members who fail to comply with ICAI guidelines.
As per Clause 132 of Companies Bill, 2012 , Central Government may constitute NFRA which will have powers same as Civil Court as per Code of Civil Procedures 1908, to oversee the quality of service and investigate ,impose penalty or also debar a member for such period of time as it deems fit. It can suo-moto or on reference made by Central Government can investigate the professional misconduct done by member/firm registered under Chartered Accountant Act, 1949. This clause can be misused against the CA professionals and their firm.
As per the proviso to Clause 132(4)(a) of Companies Bill, 2012,once the matter will be taken by NFRA, ICAI or any other body will have no say in it . This shows that ICAI will be treated as non-existent during the investigation and CA members will be at the sole mercy of the NFRA members. Also any decision taken by ICAI for its members can be reversed /cancelled or advanced by NFRA.
Every ICAI member will be vulnerable to be charged/ prosecuted by NFRA on complaints made a common person or corporate entity. NFRA can even debar them without waiting for any information from ICAI.
As the CA Act also requires the Disciplinary Board/ Committee of the ICAI to deal with professional and other misconduct by members, there is room for overlap, there are chances of overlap of member being prosecuted at the same time by ICAI and NFRA which may result in conflict.
Where professional or other misconduct is proved, NFRA have the power to make order for-
A) imposing penalty of-
i) not less than one lakh rupees, but which may extend to five times of the fees received, in case of individuals; and
ii) not less than ten lakh rupees, but which may extend to ten times of the fees received, in case of firms;
B) debarring the member or the firm from engaging himself or itself from practice as member of the Institute of Chartered Accountant of India for a minimum period of six months or for such higher period not exceeding ten years as may be decided. Appeal can be preferred against order of NFRA.
In view of the above, the accounting professionals feel that NFRA will supersede ICAI & there are fears amongst auditors of over regulation.
As per Clause 132(2), the NFRA, will be final authority to make, recommend, formulate and enforce the accounting and auditing policies and standards for adoption by companies and auditors. This goes to say that Accounting Standard Board(“ASB”) constituted by ICAI will stand superseded by Clause 132(2) of Companies Bill ,2012. It will lead to sheer duplication of the work within both the authorities. i.e. ICAI & NFRA. However the minister of corporate affairs states that the division of work between ICAI & NFRA will be spelt out subsequently.
Several representations have been made with regard to NFRA & attempts are being made to scrap the provisions in totality or at least dilute/remove certain harsh provisions. Let’s hope for the best.
It is good move by Central Govt one neutral authority must be their because CA may favour CA Guy and have very rare case booked of professional misconduct against CA
Dear CAs,
Do not worry.. this NFRA is just a eyewash. Look at the constitution of NFRA and the proposed members of the committee.They are all CAs including the Chairman.So far the reasons cited for creation of NFRA will have no use unless this nexus is break. Devil lies in details. This ICAI very well know. Even if Sachin pilot says so much in fav.of NFRA despite widespread protest from vested interest the ultimate result will remain as it is.
one of my client turnover is 70 lacs, in that 50 lacs is sales tax receipt and 20 lacs us service tax receipt, so i have confusion i have to do mvat audit or not?
because his turnover is 50 lacs and for mvat audit required to cross sales tax turnover is 60 lacs, my client is sales tax turnover is less. so suggest me what can i do ?
suggest me i can do mvat audit or not?
ICAI will now be existing only to conduct exams and to grant memberships. its existence is now MOOT
Why are the CA fraternity members feel threatened? ethically practicing members should have no fear of the new provisions. Only the members who are on the wrong side of the door are feeling threatened. If the audit and reporting is correct, members will be sure of the reports and can counter any inquiry.
The new provisions will also put a responsibility on the members for the correctness on the boos of accounts and proper reporting. By only giving ‘opinion on the books of accounts’ has no utility to the authorities. It has to be a certification. This is like Drparasjain above said “tax authorities do not believe our audited accounts in fact treat as accessories and facilitators in the deeds and misdeeds of clients”. If the reporting is only an opinion, there is no use of the same. There has to be a responsibility, if not, the audit and reporting is of no use.
The ICAI has failed both its members and the public in clarifying the position of audited accounts. The Audit Report only certifies that the accounts are drafted in accordance with law, and that there has been no indication of misappropriation/fraud. The CA only certifies that the accounts reflect fairly the financial position of the auditee. The opinion doing rounds, promoted both by the ICAI and other corporates that insist on CA certificate, is that financial statements certified by a CA are “True & Correct”. A true and correct view would mean that the audited accounts are the biblical truth.
The members of the fraternity have also promoted the image of infallibility, which is not true. Further most CAs hesitate to qualify accounts, unless there is a very grave manipulation, because such a report may not lead to re-appointment. Now, however, since the appointment is for five years, reappointment just routine, it is hoped that members would clear up their act fearlessly.
Let the members pull up their socks before pointing fingers at the Govt, public,etc.
A lot will depend on the constitution, composition and conduct of the NFRA officials to drive out corrupt practices. If that’s the intent, it’s needs to be welcomed. Not always that all CAs report and advice to right and ethical business practices to the clients as a result of which the clients resort to inethical practices too. Its a bad nexus therefore. ICAI has created CAs, but have they really conducted proper audit of the CAa and their performance (unless complaints) have been registered?? Wonder what the general answer is?
Now, if the CAs and NFRA indulge in good practices… there’s nothing to fear about in coexistence. But if they go hand in glove with larger malpractices, we are bound to see more corruption. Unfortunately, in India, we have a poor culture of ethics when it comes to bureaucracy and quasi-judicial officials. We have seen the result of it over the years… scam after scam, and what not!! Unless the CAs vouch with their clients or vice versa, it can’t happen by the drop of a hat.
CA fraternity is supposed to be the “Nation Builders” but unfortunately due to selfishness and the attitude of safeguarding the interest of “BIG” firms by the Institute we lost the reputation in Public. So this is inevitable and long overdue. If NFRA can rebuild the image of the profession from further damage we have to welcome it. Because it is not the matter of our profession alone it is the matter of holding our Nation’s reputation in the international arena too.
Why the Institute of Chartered Accountants of India is claiming that ” ICAI is the Second Largest Institute across the Glove ? Proper audit is not done by majority of CA. fraternity. Most of them are running after money. We are being neglected by the clients also.The council members including Central council members should take up the case with the Government.
CA. Subhash Chandra Podder,
06/01/2014
There is absolutely no ‘encroachment’ or ‘ovelapping’.
The way the ICAI was going about, this was but inevitable. It was long overdue and had got to come sooner or latter.
The ICAI track record on professional and other misconducts is extremely dismal and is a gross failure. That’s why scams and bank NPAs are seen to be mounting.
They owe explantions for the delays and wrong punishments to the relatively smaller frys and letting go the bigger fish, in the Satyam matter is a case in point. The ICAI is seen to target smaller defenceless members while the big guns with sexual harassment cases and other more serious offence go scotfree.
I’m on record to tell a former ICai President that I regretted having joined the prodfession whose COP i surrendered first and later its membership after over three decades of active paractice, no regrets.It is rotten to the core and reforms were overdue.
ICAI merits it.
Can ICAI talk of Global Trust Bank, Satyam, its own Prez in Nagpur land scandal, PwC, Gold plating of accounts etc; Bank audits – Harshad Mehta!? Tax bribery, etc;
Rather this is welcome that NFRA will at least ‘supposedly’ protect the wron doings!?
Today the ICAI fraternity & deeply saddened got a bad name due to some black sheep. In all professions & trades there are unscrupulous persons / entities.
But the ICAI can’t stand as ‘wholly & certainly truthful’.
Such an move pains me but I will support the fraternity so as to introspect & discipline the errant, COUNTER NFRA with perspective!?
Are you likely to come to BKC for the inauguration of new WR office?
Regards,
As a matter of fact CAs both at Micro and Macro level failed to save out honour
Did we not invite it ?? Every one gets what it deserves . ICAI council is money spinning and money spending college . Is it rumour or wide spread perception ?? Tax authorities do not believe our audited accounts in fact treat as accessories and facilitators in the deeds and misdeeds of clients
This UPA Govt is not even left the CA Fraternity. The bill is an outcome of various scams and in all the scams the CA’s are been made scapegoat.
By making all these provision, simply the blame can be shifted to CA’s