Raja Vardhan. A
Our beloved Institute of Chartered Accountants of India(ICAI) is the world’s 2nd biggest accounting body and the one with constitutional powers of framing & governing accounting practices in India. Ministry of Corporate Affairs with its new proposal of NFRA has plans to take away the two big powers of ICAI i.e,
Ø To set Accounting Standards.
Ø To take disciplinary action against its 2,20,000+ members who fail to comply with the standards set by the institute.
NFRA stands for National Financial Reporting Authority which is proposed to be set up under the new Companies Bill (i.e, Companies Bill of 2011). Though the new Company Bill doesn’t state anything specifically about superseding ICAI’s powers . But in the matter of Audit Accountability given under Clause 5 (vi) (c) of Schedule VII {as given in page no. 296 of Bill No. 121 of 2011}of the new Bill it proposes to set up NFRA, the clause is as follows:
“National Advisory Committee on Accounting and Auditing Standards (NACAS) proposed to be renamed as National Financial Reporting Authority (NFRA) with a mandate to ensure monitoring and compliance of accounting and auditing standards and to oversee quality of service of professionals associated with compliance”
The reading of the Accounting Professionals is that the NFRA will supersede ICAI and ICAI is surely not happy with about the government encroaching on its territory. ICAI President Shri . Jaydeep Narendra Shah is has not responded on the issue till date.
However Shri. Sachin Pilot , Minister of Corporate Affairs drew up by stating that “ICAI and NFRA will co-exist. NFRA will be an overarching authority, with a larger canvas to operate. NFRA will be a nodal agency for financial reporting with quasi-judicial powers and the powers to suspend auditors. The division of work between ICAI & NFRA will be spelt out once the bill is passed in Rajya Sabha.”
The most famous multimillion accounting fraud of Satyam Computer highlighted that the power of ICAI to take a disciplinary action is limited just to individual auditors and doesn’t extended to audit firms. NFRA if comes into force, will have the power to act against audit firms is well.
The bill also says that NFRA will be headed by a person “of eminence and having expertise in accountancy, auditing, finance or law” and will be appointed by the Central government ; there will be up to 15 full-time and part-time members.
Stating his view on the same Shri. N Venkatram, Partner with Deloitte Haskins and Sons “My fear is that we are overregulating the profession. The question is whether a third-party regulator will be fair and fearless. There is some consternation among accounting professionals over the government having a greater say in directing and regulating their profession. The new provisions would raise a number of practical issues apart from questioning the validity of the concept that a professional should be judged by his peers,”
It is “Deloitte Haskins & Sells” not the “Deloitte Haskins & Sons”
🙂
Dear All,
Why does ICAI-FA away think someone is encroaching its territory? Who has given this territory to ICAI.The simple answer is Govt.Now when there is a requirement of a separate oversight body for Audit and Accounts profession why is there such a resistance from ICAI-Financial Accounts (FA) lobby. Do not forget its Govt. who empowers with statutory enactments to Autonomous bodies like ICAI-FA, ICAI-CMA, ICSI and others within which they function. In the last few years it was observed that there is an urgent need for such a separate body as in many front ICAI failed to control its erring members and auditors which resulted in financial scam of national magnitude. There may not be much publicity about the role of ICAI-FA members (directly or indirectly) in any medium but Govt. knows from various sources. Hence the need. Instead of welcoming the new initiative why there is an apprehension. Some time back a top notch PWC partner hailing the Govt.decision.Now in the above post another one is having skeptical view. The Companies bill waiting for 2 more approvals (Rajya Sabha and President’s assent) and the newly elected president of ICAI-FA expressed his concern. One can sense ICAI-FA by now must have started to scuttle Govt.‘s effort well before getting the bill President’s assent in its present form or may propose to change such as the essence of the NFRA will be diluted. Hopefully this time Govt.should not succumb the pressure and back door lobby from strong ICAI-FA. And Mr.Sachin Pilot will pilot smoothly the NFRA proposal to its logical conclusion.
@vswami
For making an independent study, with a view to forming an unbiassed opinion, besdides others,the govermental report is seen to provide a useful guide – Ref. http:// arc.gov.in/9threport/ARC_9thReport_Ch5.pdf
Not necessarily echoing but in a way endorsing broadly the growing common perceptions of well-informed professionals themselves,in a broader perspective, there could conceivably be no materially varying views on one thing: That is,in the larger context of the ‘nation’s economy’ and the ‘societal welfare’, the need for independent regulatory measures, as opposed to ‘semi-regulation’, has come to be increasingly emphasised in recent times. For that matter, EVEN IN RESPECT OF THOSE AREAS IN WHICH THERE ARE ALRE4ADY IN PLACE INDEPENDENT REGULATORY AUTHORITIES INSTITUTED AND FUNCTIONING, e.g SEBI and IRDA,THE ADDED NEED FOR AN APEX REGULATORY AUTHORITY HAS COME TO, AND CONTINUE TO BE DEBATED and URGED SERIOUSLY.
One finds helpful material, in galore, in public domain for enlightening self on the crux of the whole matter.
This is a welcome steps in regulating the conduct and primary duties of the Auditors to be fair to the stakeholder and not to the dishonest business men (though they receive their bread & butter from the Business Men, in the growing corporate fraud, tax evasion etc. They are the professionals and their duties is towards the stakeholders and not to save or act as a medium of gain for the frauds. Those, who neglect in their duties and responsibilities should be punished.
I think this is very similar to the role which PCAOB plays in US, however PCAOB is primarily governing the auditors of listed companies.
It is quality improving initiative and no one should fear it.