CMA Arif Farooqui
Finance Act, 1984 introduced Section 44AB under Income-tax Act, 1961 w.e.f Assessment Year 1985-86. Under this section, if the total sales / turnover or gross receipts for previous year exceed the prescribed limits then assessee is required to get his accounts audited by an “Accountant”. This audit is popularly known as Tax Audit.
Applicability of Tax Audit:Section 44AB of Income-tax Act provides for compulsory audit of accounts of certain persons carrying on business or profession.
| Assessee | Applicability |
| Business | Every assessee, whose total sales or gross receipts in any previous year exceed Rs. 1 Crore, has to get his accounts audited. |
| Professional | Every assessee, whose gross receipts in any previous year exceed Rs.25 Lakhs has to get his accounts audited. |
| Special Cases | Assessee covered u/s 44AD / 44AE / 44BB / 44BBB, if claim that profits from such activities are lower than presumptive income and his income exceed maximum exemption limit. |
Objective of Tax Audit:
Objective of Tax Audit is to ensure that assessee’s books of account and other records are maintained in accordance with provisions of Income Tax Act and reflect correct income. This audit is for curbing Tax Evasion and ensures Tax Compliance.
About this article:This article is divided in two parts.
(a) Changed in “Accountant” definition
(b) Benefits to Government and Society by this change
(a) Changed in “Accountant” definition.
As we all knew Income-tax Act, 1961 is going to be replace by proposed Direct Tax Code (DTC) 2013. Many sections/definitions are changed in proposed DTC 2013 but here I will limit my article to much awaited and welcome changed in “Accountant” definition.
As per the proposed DTC, Accountant means Practicing CA, CMA or CS within the meaning of their respective acts. In other words, DTC allows Tax Audit not only by Chartered Accountants/CAs but also by Cost Accountants/CMAs.
The expansion of definition of Accountant under DTC is welcome change. Till now only Chartered Accountants are authorized for Tax Audit and enjoying monopoly of authority, which causing strict hurdle for voluntary compliance. Therefore, it is welcome that this monopoly is broken and Let the country gain by better, effective tax compliance.
This change in “Accountant” definition and authorizing CMAs for Tax Audit has raised some unnecessary doubts in our fellow professional friends. Here I am trying to help them to overcome their doubts, one by one.
Tax Audit is the exclusive domain of Chartered Accountants only??
For overcoming this doubts, let’s go to history, how this Tax Audit came into existence and how only CAs authorized for it?
ICAI Financial, ICAI Cost, ICSI were established in 1949, 1959, 1980 respectively.
Finance Act 1984 introduced Tax Audit u/s 44AB under Income Tax Act, 1961 w.e.f Assessment Year 1985-86. At that time, ICAI- Cost was just two years old and ICSI was not even established. At the time out of all professional institute only ICAI- Financial was completely established and had good members’ strength therefore non-inclusion of CMAs/CS in Accountant definition and only authorizing CAs, at that time is justified.
But now ICAI- Cost is more than 50 years old with good member strength too, and its members efficiently doing audit of Excise Duty, Service Tax, VAT etc. because of this, now government decided to take their services in income tax too.
So thinking that Tax Audit is the exclusive domain of Chartered Accountants only, is completely wrong.
Are CMAs competent enough to handle Tax Audit??
Syllabus, Exam procedure and Passing percentage of both ICAI are same. Perception is that because of their 3 years articleship training CAs has more practical experience to trickle Tax Audit cases.
Here I make it clear, CMA become eligible for practice only after 3 years of post-qualification experience and no one can disagree that having post qualification experience as a professional is far better than having articleship experience as trainee. Assessing officers of Income-Tax Department, who come from different streams conducting audit and scrutinizing assessment proceedings are not CA. They are able to do because of their experience they gain after joining these jobs.
CMAs are already conducting taxation audit of Excise Duty, Service Tax VAT etc, then why not Income Tax. I explained above why their name was not included earlier, now that limitation had been over and that why government authorised them in the field of Income tax too.
Along with Taxations, CMAs have wide knowledge in the field of valuation and costing, it will definitely help in curbing Tax Evasion in case of under/ over valuation of inventory. How CMAs can be useful in this, I explained in next part of this article.
(b) Benefits to Government and Society by this change
Valuation is one of the most important part of Tax Audit. If valuation is not done properly than government will lose revenue because of under computation of income. Closing stock is a powerful aspect for declaring profit. If it raised profit raised and if its value fall, profit will also fall. So closing stock valuation is an important matter for calculating correct profit and curbing Tax Evasion.
But in Audit Report/Balance Sheet of many businesses, one can easily find a note states –
“All Inventories are valued at cost, as per certificate of the management. There is no change in the method of valuation of opening and closing stock. Physically verification of stock has not been carried out by us and the same is taken as certified by the management.”
Or
“Inventory – (As valued and certified by Management).”
This gives an impression that inventory valuation is not done by auditor. If inventory valuation is left to management then it is not good as a business can easily reduce its income taxes liability by adjusting its inventory value and which is against the main objective of Tax Audit.
Few Examples are given below:
→ The cost of goods sold is the largest cost component, so method used to calculate it, can have a great impact on taxable income. Cost of goods sold is depends on inventory value. A higher inventory amount would naturally reduce the gross profit amount, thereby having the same reduction affects on taxable net profit.
→ In times of inflation and rising prices, LIFO method can be used to increase cost of goods sold. Increasing the cost of goods sold will reduce profits, which in result reduce income tax liability.
→ In same way using FIFO method for inventory valuation also provides income tax benefits in some cases. If the price of goods rises over the year, FIFO method that can be used to increase cost of goods sold that will reduce taxable income.
Yes, there are regulations that must be adhered before changing certain valuation methods for accounting purposes. One cannot change valuation of inventory now then but if inventory valuation is left for management then they can change valuation method as and when it suits them. They have to just give a declaration and they knew their business licences will not be cancelled if they gave wrong declaration, unlike CAs/CMAs who have to face disciplinary action or even their COP may be cancelled if it found they had given wrong declaration.
So inventory valuation is very important for ensuring that assessee’s books of account reflect correct income and objective of Tax Audit is fulfilled.
As now CMAs is coming into Tax Audit, we can expect a better inventory valuation because they are valuation experts. They will calculate true value of inventory by using Cost Accounting Standards – CAS and other Costing Techniques and businesses will has to pay correct income tax amount.
With their knowledge and skills, CMAs will surely set some benchmark in valuation and in result, it will help in curbing Tax Evasion in case of under/ over valuation. So change in “Accountant” definition is proof to be benefits for Government and Society.
Every company submit profit and loss account and balance sheet to income tax department. It includes closing stock too. For better result, In proposed DTC, Government should insure that assesses who are filing tax audit report must submit another form for closing stock valuation, which is to be mandatorily fled with form 3CD and must be certified by CMAs even if Tax Audit is done by other professionals.
Conclusion:
Government has shown confidence on CMAs and they worth it. They have required knowledge, skill and efficiently doing taxation audit of Excise Duty, Service Tax VAT etc. Go to any MNC/PSU, one can easily find CMAs doing jobs as Manager – Taxation, Manager – Accounts, Manager – Credit etc. and some are holding top management positions. so doubting their professional efficiency is completely senseless. Give some time, India will see great impact of their service in Income Tax.
(Author can be reached at E- Mail- arif_cwa@yahoo.co.in)
Yes … it’s a great achievement for public…
And right justice to cma and cs profession. .
Thanks
sir my CA charge me Audit fees and till date i check he not file my audit report i so many time remind him he say i file return when ask for return give me copy he say i not file and give so many excuse tom me i want who us responsible for penalty from various dept. i am proprietor kindly guide me
LIVING IN DARK IS GOOD
Nice article by Mr. Arif, and many thanks for introducing the roles of CMA in tax audit. CAs and CMAs are equally qualified and talented as their syllabus is almost same. They should respect each other and CMAs should not be underestimated.
Thanks,
There is huge difference between allowing tax audit to CMAs and CS and allowing CAs to conduct cost audit.There should be no overlap in the core domain of all three professionals viz CAs for financial audit, CMA-Cost Audit and CS-Secretarial Audit.
But tax audit and other indirect tax audits should be open for all CAs, CMa and CS because there is enormous scope in our economy and tax compliances will dfinitely increase. The client should decide whom he should hire.Lets all the three institutes work in co-operation and colloboration to prove value added services to the clients.
Thanks
LATEST RTI TO MCA : Indian economy is growing at an average rate of 5%. Hence, I want to know that requisite annual output of Practicing Chartered Accountants inducted to the stream of Indian economy on regular basis, to support voluntary compliance in all Indian taxation laws. The Institute of Chartered Accountants of India is administered by Ministry of Corporate Affairs. Therefore, kindly provide me “Financial Year” wise “Output of Number of Registered Chartered Accountants”, “Number of Registered Chartered Accountants opted to take Certificate of Practice” and “Number of Registered Chartered Accountant deleted from the list of Certificate of Practice” as per the format enclosed as Exhibit-A, U/s 6(1) of Right to Information Act.
Ram Kumar (CA) Sir,
Audit means “verification”, depending on the purpose they are classified as Energy Audit, Environment Audit, Product Audit, Process Audit, Legal Audit in USA & Tax Audit in Indian Income-Tax Act. Here, person conducting audit should be specialized in that subject. Hence, the word “Audit” is not the domain of Chartered Accountants. Assessing officers of Income-Tax Deptt. who come from different streams conducting audit in scrutiny assessment proceedings are not Chartered Accountants. In conclusion, person specialized in Income-Tax law should issue Certificates/Reports in Income-Tax Act.
Practice of law is the Prerogative Power of Advocates in India. Whereas practice of Cost Accounts, Management Accounts & Financial Accounts are not the prerogative powers of respective professional body. Because, penalty has been prescribed U/s 45 of Advocates Act, 1961 for persons illegally practicing the Profession of Law. Under Indian Constitution CAG are the Auditors with wide powers, carrying out meaningful job.
WRONG AMENDMENT CARRIED OUT BY CBDT IN FINANCE ACT, 2001 IN 2ND PROVISO TO SECTION 44AB OF INCOME-TAX ACT
Account books of State Co-Operative Societies are audited by co-operative auditors of respective State Government. Similarly, in Karnataka Value Added Tax Act, 2003 accounts of registered dealers are audited by Cost Accountants & Sales Tax Practitioners. 2nd Proviso to Section 44AB of Income-Tax Act which reads as under, authorizes auditor under any other law to sign audit report Form No.3CA & 3CD (See Note Below) & hence it takes care of such situation to avoid repetitive audit. Central Board of Direct Taxes issued Circular bearing F.No.225/168/200/ITA.II Dt.16.10.200 in this regard:-
“Provided further that in a case where such person is required by or under any other law to get his accounts audited, it shall be sufficient compliance with the provisions of this section if such person gets the accounts of such business or profession audited under such law before the specified date and furnish by that date the report of the audit as required under such other law and a further report [by an accountant]* in the form prescribed under this section”
The main intention of legislature here is to avoid repetitive audit “by an accountant” as defined under Income-Tax Act & the same person conducting audit under any other law was allowed to sign audit report in Form No.3CA & 3CD (See Note Below). Here, there is deemed presumption that person conducting audit can only be able to furnish information required to be filled-up in Form No.3CD, part of attachment to Form No.3CA.
*In Finance Act, 2001, amendment carried out in 2nd Proviso to Section 44AB of Income-Tax Act & inserted the words “by an accountant” in 2nd Proviso also. Now the situation is very typical one, that “accountants” are wrongly signing the audit report in Form No.3CA & 3CD:-
=>that too for the opinion of auditor under any other law &
=>without actually conducting audit of accounts of assesses
Therefore, 2nd Proviso to Section 44AB of Income-Tax Act has become redundant on date.
NOTE: Rule 6G(1)(a) prescribes Form No.3CA applicable to the cases covered under 2nd Proviso to Section 44AB of Income-Tax Act. In Form No.3CA, it is clearly mentioned under Note No.2(iii) any person who is, by virtue of any other law, entitled to audit the accounts of the assessee for the relevant previous year has to sign Form No.3CA. Hence, amendment carried out in Finance Act, 2001, inserting the word “by an accountant” in 2nd Proviso to Section 44AB also, is contrary to the original intention of legislature to avoid repetitive audit by an accountant and accountant is signing audit report without practically conducting audit.
I concur with CA Jay Sharms ! All audits including cost are in the domain of CAs ! If CMAs are authorised for tax audits ICAI shud relax the maximum no. of Tax audits for CAs
GOVT. MAY DEFFER DTC & INTERESTED IN TPB ?
DEBASISH BASU SIR,
As per the information provided by Directorate of Income-Tax (Systems) only 65,570 CA’s have signed Tax Audit Report for the Asst. Year 2013-14. Due to Tax Audit ceiling, Non-CA Tax Professionals handling tax audit cases have to roam around in search of empty slots of CA Signature to give compliance in the case of their clients during due dates. This has also resulted in high cost of compliance, due to high demand & extra payment made for reservation of empty slots of CA Signature. These CA Certificates in Income-Tax Act are causing strict hurdle for voluntary compliance not only in Income-Tax Act, but also in other Central and State Govt. taxation laws. In another 10 years, Non-CA’s who entered the Tax Profession in 1980’s will all eliminate & Govt. has to relay on only CA’s for seeking compliance under all Indian taxation laws. Can any one imagine impact of this situation to Govt. revenue.
Dear Sir, You have explained too good this article, it clears all the doubts related with amendments and scope, since many of the year CA’s play the monopoly of their authority but now the time to change this rule. DTC-2013 will not only provide scope for CMA’s, CS’s and Advocates but it also help to protect interest of Shareholders, Economy and Society at large.
DEBASISH BASU SIR,
I HAVE FURNISHED BELOW PROOF TO SHOW THAT GOVT. HAS LOST HEAVILY ON ACCOUNT OF INCOME-TAX, BECAUSE OF MONOPOLISTIC POWER OF TAX AUDIT
Particulars of Income-tax admitted in tax audit cases for Asst. Year 2012-13 & 2013-14 that relates to return filed in ITR-4, 5 & 6 as provided by CPC, Bangalore as at 28.05.2014 are as under:-
Particulars……………………………Asst. Year 2012-13……………….Asst. Year 2013-14
Total Income-Tax Admitted in ITR-4 Rs. 23,986 Crores Rs. 23,952 Crores
Total Income-Tax Admitted in ITR-5 Rs. 20,712 Crores Rs. 21,556 Crores
Total Income-Tax Admitted in ITR-6 Rs 2,92,266 Crores Rs. 2,34,456 Crores
Margin derived by farmers is not taxed in Income-Tax Act, but margin derived by next sellers of such agricultural output is taxed in their hands in Income-Tax Act. Presuming the output of corporate assessees reach the ultimate consumer in three stages & considering tax admission in corporate case & 50% of such corporate assessees do business with non-corporates covered by tax audit, who are in between the corporates & retailers and also considering non-corporates engaged in service sector, I am of the strong view that combined Income-Tax admission as per return filed in ITR-4 & 5 covered by tax audit U/s. 44AB should have crossed at least Rs. 15,00,000/-Crores. (Basis being 80:20 ratio of Ag. & Ind. Output).
DEBASISH BASU SIR, YOUR ANALYSIS IS HIGHLY APPRECIATED. THIS IS WHAT I AM QUESTIONING TO CENTRAL BOARD OF DIRECT TAXES SINCE FROM 2001 ON PLACING NOT LESS THAN 300 APPLICATIONS UNDER SECTION 6(1) OF RTI ACT IN THE MATTER.
All these above comments are good and the primary issue or the basic issue “whether Tax Audit should remain exclusive domain of Chartered Accountants” has been attempted to be justified or opposed from different angles. In order to have an unbiased view from the angle of society at large and the Government , the basic issue in this context should be revised as “whether Tax Audit by Chartered Accountants has generated more revenue for the Government or whether Tax Audit has led to better voluntary compliance from the members of the society”. unfortunately no such data is available that depicts how much incremental revenue generated due to compulsory tax audit by chartered accountants . The members of the society at large even the assesses are ignorant of the fact that what’s the implication of compulsory tax audit or why they are required to do tax audit at all. Tax audit at present is just a ritual now just as so many other audits and It’s a known fact that 3CB and 3CD in the context of the present scenario are just routine affairs implying just filling up another form as like as hundreds of others need to be filled up for different purposes. A very small or insignificant proportion of tax audit reports are complete in all parameters and serve its true objective in its true perspective. It’ should not be a matter of dispute that whether tax audit should be exclusive domain of chartered accountants or CMA, CS, Advocates and others should be permitted to have a role to play rather the point of dispute should be whether tax audit should at all be continued in its present form imposing an additional burden on the assesses without generating additional revenue for the Government as well as additional benefit to the society / community at large
Practical tax audit process involves, deletion of cash transactions from the books of accounts to save the assessee from penal action under Income-Tax Act. Any person conducting tax audit should follow this process, because he is paid by the assessee & suppose to act in favour of the assessee. That is why it was held in the case of CIT Vs G.M. Dandekar 22 ITR 235 (Mad) that CA’s can not be made accountable to Income-Tax Department as they are acting in representative capacity. Hence, section wise wrong claims not reflected in tax report issued by CA’s since 1984. Therefore, it is clear that basic concept of appointment of auditor by assessee to issue tax audit report for revenue is totally wrong & hence CBDT can not get section wise wrong claims in tax audit report, whoever may be authorised to conduct it.
It was alleged that Fazulullah the Dy. Commissioner, Tirupathi Division, Tirupathi had demanded a bribe of Rs.5 Lakhs from Pengaluri Musaliah, A Chartered Accountant of Cuddappah with regard to Income Tax assessment of C.A.’s client & to give a favourable assessment in the scrutiny pertaining to the account of HUF which was pending with Dy. Commissioner. Case registered on IT Offcials & CA.
Appearance of Chartered Accountants in scrutiny proceedings U/s.288(2), other than CPC/Evidence Act against summons issued U/s 131, is bad in law for the reason that CAs conducting Tax Audit U/s 44AB for revenue can not appear for same assessee in scrutiny proceedings by the strength of power of attorney U/s 288(2) of Income-Tax Act. This is comparable to same Advocate appearing both for Petitioner & Defendant. This position of Chartered Accountants prevailing in Income-Tax Act, requires kind attention of Tax Policy Division of Central Board of Direct Taxes.
Following are genuine points should be considered by CBDT before taking action for widening genuine tax base of assesses in India:-
(1) Assesses sign affidavit format called Verification in the return of income, which makes him liable for imprisonment which may be extend to seven years with fine U/s 277 of Income-Tax Act in the event of furnishing false information. (See also Section 181 of IPC) Further, it was held in the case of CIT Vs HCIL Kalindee ARSSPL Delhi HC Dt.29.07.2013 that mere CA Certificate do not establish the bonafide of assesses claim & CIT Vs G.M. Dandekar 22 ITR 235 (Mad) it was held that CA’s can not be made accountable to Income-Tax Department as they are acting in representative capacity. Therefore, Deptt. should decide that it wants CA Certificates or Revenue ?
(2) Whether Widening of Tax Base has direct relation to growth in number of persons engaged in Income-Tax practice? If so, who are the persons authorized to practice Income-Tax law U/s 288(2), assisting for propagating & compliance U/s 139. Whether they are increasing/decreasing every year, because of support/cornering in the Income-Tax law or is there any constraint in their practice. Even holding CA’s are increasing, whether they stick to practice without seeking employment ?
(3) Hurdles in Entry Door U/s 139 of Income-Tax Act, analyzing the types of hurdle such as highly complicated process of e-return filing prevailing under Income-Tax Act on date or any other hurdle that relates to assesses or tax professionals. Extent of application and coverage of Income-Tax Act as compared to other Indirect Taxes, quantum of tax professionals required for the same and there demographic spread throughout India. Ie, whether persons on whom full power of certification and representation granted in Income-Tax Act on date are evenly spread throughout India to cover all cases ?
(4) Stop filers tracking mechanism, whether tax professionals can handle such event better by sending notice on regular basis to their clients, if they are encouraged by the Income-Tax Deptt. without bias.
In India there are professional bodies passed by the Acts of Parliament, to protect the interest of their members only, but there is no professional body to generate tax professionals to protect the interest of govt. revenue. Therefore, it is right time, our Central Govt. should seriously consider passing of Tax Practitioners Bill either in the lines of Tax Agent Service Act of Australia or in the line of Tax Practitioners Bill of Republic of South Africa to generate tax professionals to fully support voluntary compliance in Indian taxation laws to enjoy the privilege of optimum tax collection by widening of genuine tax base of assesses. In developed countries like Australia 70% to 80% of population are under tax net, whereas in India only 2% of population are under tax net. This is because of confining certification powers only to Chartered Accountants in Income-Tax Act, 1961 as discussed above. On date ample tax compliance work is there, but there is no required Tax Professionals to support voluntary compliance.
Furnishing Certificate & Reports in Income-Tax Act require both interpretation of facts & law. Interpretation of facts is not a tough job, but interpretation of law is a tough job. Practice of law is the Prerogative Power of Advocates in India. Whereas practice of Cost Accounts, Management Accounts & Financial Accounts are not the prerogative powers of respective professional body. Because, penalty has been prescribed U/s 45 of Advocates Act, 1961 for persons illegally practicing the Profession of Law. Under Indian Constitution CAG are the Auditors with wide powers, carrying out meaningful job. Due to T.D.Venkat Rao (SC) case only Chartered Accountant issue Tax Audit Certificate in Income-Tax Act. In view latest verdict in the case of Bar Council of India Vs A.K.Balaji (SC) Section 288(2) of Income-Tax Act require deletion from the the statute. In the result only CAs will conduct Tax Audit & only Advocate will plead & act before the Income-Tax Authorities. Can any one imagine the ill effect of this situation to Govt. revenue & troubling assessees to approach more than one Tax Professional to give compliance in Income-Tax Act.
On careful study of Section 288(2) of Income-Tax Act read with Rule 12A of Income-Tax Rules, it has to be presumed that all five class of persons who are authorised to prepare Income-Tax return possess knowledge of Section 145 read with 14 Accounting Standards of CBDT, required for Income-Tax Practice. Because certain qualification has been fixed in Income-Tax Act for these five class of persons. Further, Accounting Standard framed by ICAI (Financials) & IFRS not required for Income-Tax Practice. Here the question is, when such other four class of Non-CA Tax Professionals are authorized to prepare return under Rule 12A of Income-Tax Rules, there is no justification to prohibit them for issue of Certificates/Reports in Income-Tax Act. Therefore, it is clear that on introduction of CA Certificates in Income-Tax Act, original intention of legislature in Rule 12A of Income-Tax Rules has been struck down.
Vilas P Sir,
World over accounting functions are classified in to Cost, Financial & Management Accounts & by latest CMA’s are authorised to work in all three areas and only full accounting body in India. This being the case only CMA’s be authorised to conduct both Cost & Financial Audit of Ltd Companies in India.
Vilas P Sir,
Originally tax practice was carried on by only Advocates in India, CA’s took back door entry & monopolized it by introducing tax audit certificate in 1984. This was also cautioned by Sri.P.C.Padhi, former Chairman, Central Board of Revenue and Deputy Controller & Auditor General of India, Sri.D.K.Rangnekar former Editor, Economic Times, who were the members of Direct Taxes Committee, popularly known as Wanchoo Committee & gave dissenting note on the issue.
Among Tax Professionals supporting State & Central taxation compliance, Non-CA Tax Professionals constitute around 85% of total Tax Professionals. Tax Practitioners & Tax Consultants mentioned above are assisting assesses on regular basis by way of filing monthly returns under State VAT Act & Income-Tax matters in Salary & Direct Refund Cases. Tax Advocates & Chartered Accountants are assisting large tax payers for giving compliance under Income-Tax Act. Tax Advocates are facing problem of roaming around in search of empty slots of CAs for getting tax audit certificates during due dates. This type of situation prevailing only in India. In view of 46 Plus CA Certificates in Income-Tax Act, Income-Tax Deptt. is not getting compliance from all VAT Dealers handled by Tax Practitioners & Tax Consultants.
Girish Sir,
As per the data provided by CPC, B’lore, combined Income-tax admission in ITR-4 & 5 covered by tax audit is only 40,000 Crores & ITR-6 is only 2,50,000 Crores. Margin derived by farmers is not taxed in Income-Tax Act, but margin derived by next sellers of such agricultural output is taxed in their hands in Income-Tax Act. Presuming the output of corporate assessees reach the ultimate consumer in three stages & considering tax admission in corporate case & 50% of such corporate assessees do business with non-corporates covered by tax audit, who are in between the corporates & retailers and also considering non-corporates engaged in service sector, I am of the strong view that combined Income-Tax admission as per return filed in ITR-4 & 5 covered by tax audit U/s. 44AB should have crossed at least Rs. 15,00,000/-Crores. (Basis being 80:20 ratio of Ag. & Ind. Output).
In this situation why monopoly of tax audit by only CA’s in India.
Girish Sir,
What experience Girish Sir, now a days computer itself is a good auditor. To make 5+5=15 & to learn how to gratify tax authorities we should do 3 years articleship ?
Well explained article, Thank you for your valuable article. But sir the Finance Ministry and CBDT all are blind. You , the CMA professional is best suited for Tax Audit and Inventory valuation expert for the purpose of Tax Audit. But it is very unfortunate that for the span of 30 years ( 1984) of introducing Tax audit Chartered Accountants are enjoying monopoly of authority. It is just like as cricketer ( Chartered Accountants) in India other sportsman (CMA , CS & LAWERS) has no value.
Sir,
If you are CA & qualification from recognized university is a B.COM than your qualification treated as B.COM for CPA examination.
• Chartered Accountants: If you have also done Post-graduation or M.com from recognised University than you are eligible, incase you are just a B.com Candidate, the procedure will be similar to that of a B.com above.
Mr Girish ji,
Here i want to explain qualification required by CPA. If a CA wants to become CPA than he need to pass examination.
Q. What is the minimum eligibility to appear for a CPA exam?
A. CPA Exam is most suitable for CA, ICWA, CS, LLB, MBA (Finance), M.com and Commerce Graduates (from recognized University)
• M.com or Post Graduates: Most of the states in the US require 150 semester hours in order to apply for CPA. A MCom/PG Degree from recognised Universities in India is equivalent to these 150 semester hours, so they are eligible to write the exam.
• BCom: Students who are BComcan apply for the US CPA, however the number of states accepting a BCom Degree will be relatively very less. So the candidate will have to send their academic credentials to a relevant state, if they are accepted the candidate is eligible for the Exam.
• Chartered Accountants: If you have also done Post-graduation or M.com from recognised University than you are eligible, incase you are just a B.com Candidate, the procedure will be similar to that of a B.com above.
The author himself admits that the expertise gained in 3 years articleship training is the backbone of a Chartered Accountant to do tax audits, please see that this is very important. All over the world, CPA’s/CA’s are assigned with the task of audit and CMA’s are a part of the corporate world for incrementing value for money for Companies through their system of learning. Instead of running after a few numbers of audit assignments, which will never be beneficial in terms of money, why can’t focus to improve the standards in an international way so that the members can have similar expertise of international cost management institutes and explore more opportunities in India and abroad. When reading through the article, author states that the study pattern and syllabus of both ICAI are similar, if so, author should clear if it is possible that chartered accountants can do cost audits. Three institutes have their own roles in corporate world, for professional advancement, better focus on their on area of expertise.
Audit in Companies Act is a Cost, Financial & Management Accounts Audit. Here only CMA’s be allowed to conduct the same (Annual Reports presumed to be understandable by members of public indicates the same). Reason being CA’s are authorised to work in the area of Financial Accounts only & CMA’s are authorised to work in all three areas of Cost, Financial & Management Accounts in view of latest amendment to CMA Act. Audit in Income-Tax Act, is a Tax Law Audit, therefore all persons authorised to prepare return under Rule 12A read with Section 288(2) of Income-Tax Act shoud be allowed to conduct audit U/s 44AB. Here more stress is given for interpretation of law in the process of audit/verification. Therefore decision of learned officials in finance ministry to expand definition of accountant in DTC-2013 to include related professionals is appropriate. I might have used word most appropriate, if Tax Advocates & Income-Tax Practitioners were also included in the definition of accountant in DTC-2013. As CBDT could not get total of section wise wrong claims in tax audit report furnished by CA’s since 1984 to conclude quality assessment, why 2nd opinion about expanding the defintion of accountant in Income-Tax Act, 1961/DTC-2013
The article is just a selling product for CMA.
Thx
Nishant
World over functions of Accounting are classified depending on the area of operation, application & usage. They are as under:-
(1) Cost Accounts=> Manufacturing/Processing Activity..
(2) Financial Accounts = > Trading Activity..
(3) Management Accounts => Management Level/Decision Making..
Note:-Management Accounts is nothing but application of Ratio Analysis and Cash Flow Statement on Cost and Financial Accounts.
By The Cost and Works Accountants (Amendment) Act, 2011, name has been changed to “The Institute of Cost Accountants of India” and the members got the power to work in the area of Management Accounts also and can re-designate themselves as ACMA/FCMA. Now, it is funny that both institutes passed by an Act of Parliament called by similar short name of “ICAI”. Of course syllabus is almost similar in all the three institutes called by different name of ICSI, ICWAI and ICAI.
In view of the above amendment, Cost Accountants now possess wide power of working in the area of Cost Accounts, Financial Accounts & Management Accounts. And hence, Institute of Cost Accountants of India should be called full accounting body in India. Whereas, Chartered Accountants are restricted to work in the area of Financial Accounts only. This being the case, I do not understand why only Chartered Accountants are authorized to conduct Tax Audit U/s 44AB of Income-Tax Act and enjoy monopoly of authority, causing strict hurdle for voluntary compliance.
berojgari me musaddi lal ke hasin sapne
Anybody compares the skill and expertise level of Cost Accountants with Chartered Accountants will get to know who should audit the financial statements. If at all Cost Accountants wants to audit let them pass the CA Exam. CMA cannot be used as backdoor to audit the financials of companies.
It is very painful when I see, the members of three renowned Institutes in the field of knowledge and noble profession are on the verge of disrespect towards one another. All CAs, CMAs and CSs are contributing towards Nation Building and prosperity. All the Three Institutes should form a united group to resolve any disputable issues and to nurture the profession of each other. We should think neutrally and should avoid comments which disrespect any professional fraternity including advocates.
I think CMA and CA institutes should be merged and establish another institute called CPA, It will be benefit for both CA’s and CMA’s. In Canada CA and CMA are merged last year.
CPA qualification are more relevant in today’s world. as most of the advanced developed countries like USA, China, have only CPA.
Yes you are right.In the same breath Chartered Accountants and Company Secretaries should be allowed to undertake Cost audits and the Secretarial Audits.
I read comment of CA Jay Sharma & I think the approach is wrong
The approach is you take away something from us & so we want to take away something from you.(it seems to be imprinted in the mind that ALL audits are domain of only CA)
cost audit is specialised area of cost accountants. CMA’s have the requisite expertise of the area.
In the given article,the author has beautifully & with clarity put forth the points.which ca Jaikumar could not counter & I think that is the reason of the comment.
Anyway the Government has recently reduced the scope of cost audit to drastically, this comment has become redundant
The author has beautifully emphasized on CMA’s role on direct tax audit.we are having the knowledge alongside with CA’s..so why not?and i believe in coming days we will see many CMA’s are doing tax audit successfully.
Well explained … Thank u sir for ur article.
Author has beautifully written the article and deserves the appreciation !
However, CMA can do some important thing to contribute tax audit. One of them is the separation of expenses required for exempted income. These expenses are required to be disallowed to calculate the correct profit for taxation.
Segment reporting is another area.
One more area is Transfer Pricing, which is cost exercise.
However, present tax audit methodology is becoming redundant, as in spite of so many tax audit large no. of assessments are taken up and no. of queries are coming up even after tax audit made.
CMA Suresh Pimple,Aurangabad
Yes, CMAs are truly capable of doing tax audits.
CMA Arif, I really appreciate your effort in bringing out this article which reflects the expertise of CMA profession. I hope more and more CMAs will come out with similar articles. Keep it up.
I think so you doing selling the product or doing marketing more than giving presentation.
Kindly check it again and do it professionally.
Tk Care
Regards
CS Nitin Grover
+91 – 95 82 00 94 94
It is really a very good encouraging news for CMAs. Competition is always good and removing monoploy will be added advantage for customers.
I fully agree with author CMA’s played important role in tax audit. we cann’t deny practice area in (44ab audit) of CA, CMA, ADVOCATES & CS etc.
CA’s Role:- CA’s are financial accountants & audit u/s 44ab covers
financial activities.
CMA’s Role:- They are expertise of valuation of stocks, machinery & other
assets also part of tax audit. so for we cann’t deny there role.
Advocates Role: Deductions & expenses claimed properly as per law. Audit
u/s 44ab also include interpretation of laws. So for we cann’t
ignore Advocates role in tax audit.
CS: CS have also important role.
Even that ITP should be authorised to conduct tax audit for widen genuine tax base. when we can authorise non law professionals respresent the case then why not we authorise them to conduct tax audit.
CAs should also allowed to do cost audits and area of cost audit should be widened.further mandatory appointments of CSs in company should be removed and should be allowed for all CMA and CA.
I want to ask whether CS are capable to conduct tax audit by virtue of their study syllabus?
CAs should also allowed to do cost audits and area of cost audit should be widened.further mandatory appointments of CSs in company should be removed and should be allowed for all CMA and CA.