CA Amresh Vashisht

It is a bare truth that chartered Accountant profession needs progressive dimension of running a successful Audit firm. Another truth is that in today’s national scene It is time that with the visualization & aspiration, every individual or sole proprietor should create new avenues and be ready to successfully administer his or her practice. My vision is not an extravagance, but an essential role in shaping the sole proprietor firms.

The frustration felt by sole proprietors practitioners are real and they are exacerbated by the tremendous charges that are surging through the profession. The leaders stressed the need to increase the size of the firm and try to connivance the members that increasing the size of the firm lead to signal of success.

A submission here is not merely another statement. It is a reflection of today’s reality and is a declaration of the desirable future conditions. There are growing pains of Small CA firms so here are the available Remedies. Only regulators timely intervention shall be a real help to 70% of the total members engage as individual / sole proprietors. Our regulator should support all the measures to overcome from the challenges being faced by such practitioners. Point of consideration is that such firms represent 70 % of the total firms and all below mention policies are having a positive nod of the regulator. In a nutshell the growing pain of sole proprietor on the below mention opportunities are as follows.

i). Almost NIL opportunity where work is allotted through tenders.

ii). No statutory Bank Audit for the first three years of the practice.

iii). Earlier condition of at least allotment of 40% work of statutory Bank Audit in the case of sole proprietors dispensed with.

iv). No PSU minor audits for the first five years of the practice. Thereafter the net profit of specified sum be maintained otherwise ineligible.

v) No concurrent audit to sole proprietors. Only Partnership firms are allowed that too 4 concurrent per partner per year.

vi) Sole Proprietors firms are not considered for statutory audit of RRBs

vii) Sole Proprietors firms may not consider for statutory audit of the cooperative banks.

viii) CA firms or own staff left to the individual banks for concurrent audit of the cooperative banks.


ICAI maintains a committee for capacity building of small and medium firms. I have also served the committee way back in 2010 and can say with confidence that non standing old committee has failed to give a single measure for capacity building of small and medium firms. The following issues are of paramount importance to the existence of the smaller firms and requires immediate redressed. Such matters are being dealt under professional development committee and such vital issues have never surfaced at the capacity building of small and medium firms.


Tendering abuse shall be dealt strongly. In case of tender acceptance by any authority, a cost sheet by a CA be approved by ICAI before taking up the audits. If ICAI rejects the cost sheet, the members shall not be eligible for initiating any work awarded through such tender. ICAI approval over cost sheet shall be dealt with the same spirit as Communication with previous auditor. Tendering offers must be free from emphasis to the size or the turnover or net-worth of the Chartered Accountant Firms and no such minimum criteria need to be specified in their minimum eligibility requirements to serve them. Regulator should formulate the guidelines to regulate the tendering process under Clause (6) of Part I of first schedule.


A Statutory bank branch audit should be made compulsory for all bank branches, irrespective of the amount of advances and/or deposits of the branch. The policy of cut-off limit of advances of Rs.20 crores should be taken back being detrimental in every respect and to every stake holder. The first three year eligibility criteria should be dispensed. Equal playing field shall be provided to all the eligible with the weight age system of year of experience. The individual and sole proprietors should have at least 70 % of the total statutory bank audits. The categorization system being illogical be scrapped.

In case the Govt. decides to retain a cut-off limit of advances of Rs.20 crores, the branches falling below this limit should be audited once in 3 years instead of the present system of 5 years, which is an extra long period and gives impetus to wrong doings at such branches.The basic structure for allotment of bank branch statutory audit should be revised & should be based on the advance plus deposits exposure of branch instead of advances only. The auditors are responsible for the authenticity of deposits also.


Sole Proprietors Chartered Accountant firms in India with at least one full time FCA can apply for empanelment with this office for allotment of audit of Public Sector Undertakings. This criteria for empanelment and selection of statutory auditors have been arrived at after due consultation with the Institute of Chartered Accountants of India. For the first five years sole proprietors are not eligible for such audit. The selection of CA firms for appointment as statutory auditors of PSUs whose audit fees are up to Rs 1.50 lakh is made by correlating the point score earned by each firm of Chartered Accountants towards empanelment with the size of the audit fee. The point score is based upon the experience of the firm, the number of partners and their association with the firm, number of Chartered Accountant employees. So even after five years there is very remote possibility to get any audit from C& AG.

Sole Proprietors are also subject to achieve a designated profit from their proprietary firm. Even after achieving 5 years , he is not getting the net profit of Rs. 3,60,000/- in metro and Rs. 1,80,000/- for non metro. He or she shall not be eligible for the C& AG audit. This is in addition to weight age granted for every partner so in no circumstances, a sole proprietor can’t beat a smallest partnership firm. What a mockery? Above all, it is quite disgusting that the same is having an approval of the regulator.

This 5 year blocked don’t have any merit to stand. It’s a hindrance to the growth of a sole proprietor firm. There should be an independent scale of measurement of sole proprietor’s weight age as logically sole proprietor firm cannot beat a partnership firm.


In 2009, RBI revisited the concurrent audit portfolio and issued the guidelines. The guidelines were having a start note that the policy is approved and consented by the regulator. The Guiding Principles on Concurrent Audit issued by the RBI in September 2012 clearly defined that Chartered Accountant Firms should be appointed from the RBI panel as per the gradation based on the size of the Branch. Here too sole proprietors have been kept out of reach for such audits. Few banks are still carrying the sole proprietors, but it seems now it’s a matter of a few days.

The regulator must have been in support of sole proprietors as they need a helping hand from the proprietor. This limit should be scrapped and branches with some specified advance/ deposit limit be reserved 100% for the sole proprietors. The RBI dictated a partnership firm for concurrent audit and the regulator has nailed the last nail in coffin by passing $ concurrent Audits per partner in one year. It was a clear accommodation to a few of the firms of the super powers of the institute.


The 2009 requirement that Sole proprietorship firms to be considered as SBA, to the extent of 20% of the total requirement has been dispensed off in 2012. Now For Standalone RRBs Statutory Auditors may be drawn from Category II & III and In the case of non availability of Category I, II & III , auditors may be drafted from Category IV and Sole Proprietors firms may not be considered for statutory audit of RRBs. These conditions were placed after an approval of the Finance Minister of India.

It is totally surprising that the vital changes were made against the sole proprietor firms which are all most 70 % of the total firms and regulator consented and stood with the unjustified standing as mute spectator. The size of the RRB and the remuneration of the RRB are totally fit to reserve this audit opportunity in favour of sole proprietors or upper most mid size firms. Category-IV auditors and Sole Proprietorship Firms even with the experience of more than 20-25 years are not considered for the appointment as branch auditors of small branches of the RRBs. What a mockery?


For a Statutory audit of the cooperative banks, a new audit procedure is about to implement as agreed between the state Governments, NABARD & RBI. But the real tragedy is that Sole proprietor firms are out of eligibility norms and as per agreed policy having a nod of the Finance Minister of Government of India. This policy embarks that as far as possible CA firms falling in Category I & II are to be chosen .However, firms of III category with good experience may also be chosen.

Since the Concurrent audit of the cooperative Banks, the option to consider whether the concurrent audit should be done by the external auditors (professionally qualified Chartered Accountants) or its own staff may be left to the individual banks.


The present limit of the Tax Audit u/s 44AB is 60 per partner. This limit is prescribed by the regulator. This tax audit limit does not cover the tax Audits u/s 44AD. This omitting of limit u/s 44AD is again in favour of partnership firms. The limit criteria are based on four fundamental wrongs, but being dragged by the regulator since long. The first wrong is not recognizing the audits u/s 44AD though the audit report is same, working is same, and the risk of an accountant is also same then why there is a difference between 44 AB & 44AD. The second wrong is the limit of 60 audits a year. The limit should have both the audits and be increased to make it growth oriented for the sole proprietors. The third wrong is illogical authorization to signatory on behalf of firm. TAX Audit has to be signed by an accountant as defined in section 288 of the income tax act. Section 288 does not recognize the existence of firms, but the regulator has allowed the signing of Tax Audit reports beyond prescribed limits to be signed for and on behalf of the partners of the firm.


Presently Tax Audit are not applicable to Cooperative societies, Trust/societies (Non Business entities), the same be put to some limit based on their revenue receipts. This will be a new professional opportunity and work shall increase manifold without much effort. The reports should also be limited and regulated through the maximum number of audits on the line of Tax Audit.


One central body should appoint auditors for the state government department and local bodies and for many governments run organizations, which are kept beyond the reach of CAs or where CAs are appointed without any publicity. MEF should get a statutory recognition for allotment of various Government audits.


The sufferings for MID sized firms i.e Up to 5 partners are also on the same line of sole proprietors. These mid sized firms are the most suffers for Tendering abuse, which require be dealt strongly without any failure. Sole proprietors are not eligible for tendering in most of the cases, but the work designated in this section of midsized firm is being swallowed by a few firms. As suggested earlier, In case of tender acceptance by any authority, a cost sheet by a CA be approved by ICAI before taking up the audits. If ICAI rejects the cost sheet, the members shall not be eligible for initiating any work awarded through such tender.

The government, authorities and other stakeholders are required to be effectively communicated that they need not give over emphasis on the size of the turnover or net-worth of the Chartered Accountant Firms, and no such minimum criteria need to be specified in their minimum eligibility requirements to serve them. The Government, RBI and other regulators may issue guidelines on regulators persuasion that Midsized CA Firms are only considered for Government sponsored jobs and assignments for any organization receiving Government Grant.

Conclusively, In a very dignified manner, a dirtiest game has been played by those who are at the helm of affairs. The mapping of the timing of the wrongful decisions taken against the sole proprietors and their firms is a part of the conspiracy being hatched by the so called leaders. Down the line 5/7 years, these sole proprietors were blue eye guys which have now been sidelined. It’s quite surprising that the regulator have never protested for the unjust being awarded to sole proprietors rather the regulator has given its consent to go ahead without assessing the damage to the majority. There is a need to increase the scope of work for practicing chartered accountants, especially the new entrants to the profession to get the minimum assignment as a motivation to continue the practice.

(About the Author- Author was Member of ICAI- Regional Research Committee 2013-14 and ICAI- Committee For Direct Taxes 2011-12 and can be reached at email or on phone Phone: 0 1 2 1-2 6 6 1 9 4 6. Cell: 9 8 3 7 5 1 5 4 3 2 having office at 1 1 5, Chappel Street, Meerut Cantt, UP, INDIA)

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22 responses to “Growing Pains of Small Sole Proprietor CA Firms”

  1. ca.asgoyal says:

    Such a true Article. Sir Please forward this article to the concerned authorities so that they also know the pain of small CA firms.


    Its very true.
    And this could only happen if we elect our leaders out of sole proprietors who understand this and boycott the leaders from partnership or big firms.


    Excellent.. But, what is the mechanism to convey this to the concerned regulatory authority, so as to have effective representative??


    Excellent…. But, as rightly mentioned, how this can be communicated to concerned regulatory authority so as to have due consideration?

  5. CA.Anubhav Srivastava says:

    Truly excellent, great efforts Sir

  6. Adi Maheshwari says:

    Hope there is some rational action on this issue.

  7. Sheetal Gadiya says:

    Guess in no other profession this bifurcation is noticed.An individual doctor can play with so many lives.An individual architect can design such huge buildings.
    Then why its expected from our own body that a sole prop CA can’t deliver the required performance.Time to take sincere efforts in this regard. Thank u Vashisht Sir for highlighting this grievous issue of our Profession.

  8. CA S.K.JHA says:

    Dear CA A.Vashisht ji
    Thanx a lot for raising such a true voice.The day is not far when we Sole proprietors have to beg for audit due to wrong policy/guidelines of our perpetrators.There should br fair play in professional set up i.e., Right of Equality & Fraternity as embeded in our Constitution.Now the time has come to boycott these red-tapism system and re schedule the wrong guidelines.

  9. CA.MAHESH KUMAR says:

    When C.O.P has been issued to a member of ICAI it means he can audit and certify financial statements of any entity whether large or small.

    If there are conditions C.O.P should be issued with conditions.

    These so called leaders are enjoying with our money and vote and at the same time making fool a large highly educated professional group.

    Proprietorship firms should unite and elect the members who are proprietors and concerned for the interest of proprietors.

  10. Anil says:

    Good article,but concentrate more on govt audit which is not of much importance to new ca’s. It will be useful if article also speak about how capacity building is essential to get work from big corporates.

  11. A K Agarwal says:

    Should be forwarded to various Politicians, Govt. Authorities to consider the issue. We shd elect Central Council members who actively pursue this goal and npt only lip service for getting elected.


    Alas Some body feeling painful story
    Regulator must look out & be active now and it is high time to take appropriate policy decisions.

  13. shailesh jhamad says:

    the artcile is realistick bust over and above who understand the problem of a soleproprietorship firm everybody wants to be a firm and want to destroy the proprietorship firm if a proprietorship firm enter into partnership firm it forget the past in which the firm was a soleproprietorship and doing well now the firm growing and each want to be join the same any how and working of the same become very cheap and just to get work and do the needful and ok

    so your article is important and eye opening of us to save the future really a representation should be given and efforts to be made of being abolish in the near future.

  14. CA Mukesh Saran says:

    No doubt CA. Amresh narrated the inner pain of SOLE Proprietors and also suggested so many acceptable or non acceptable solutions for the regulators.

    But, I am unable to understand for whom these suggestions are and who will brought this in the notice of the regulators? “Billy ke gale main ghanti bandhega kaun”. Whether each and every member will go to the regulators with these? And if we are supposed to do this job, for what we are electing some one from us to represent ourselves?

    CA. Amresh ji as he mentioned, worked in ICAI, so he may better understand the mechanism of ICAI. When you are in, you will feel the real crux of implementing any suggestions because each and every member of the team inside having his own vested interest.

    For any body it is very easy to give suggestions but it is very hard for the same person to convert these in to reality.

    One more point which I want to bring to kind notice of every member (though he is himself aware), why every “Neta” only wake up before the elections of ICAI. Now-a-days every member’s mail box is full of updates, which were even not read by the senders himself.

    I know after December, every thing will move as it was moving earlier and we general members will again see some good suggestions before the next election.

  15. CA OM KUMAR GUPTA says:

    Very nice article sir thank u very much

  16. CA.MAHESH KUMAR says:

    Dear Amreshji,

    Thanks for wonderful article, I appreciate your efforts by heart.At least 70% council members should be from small proprietorship firms and you must be one among them to raise the issue.We are highly educated professionals and we must elect those who will fight for us (small firms).

    Please spread the message to all small firms through social media/e mail.

  17. Shankeran says:

    Dear Vashisht Sir,

    Point well explained the pain of being a small propritorship firms.

  18. indranil samaddar says:

    Dear sir,

    I fully agree with your views. If a CA wants to remain independent then the various regulations are not conducive enough to let him remain independent, he has to compromise with another person (partner) if wants to survive. In other profession, like legal, medical etc. no one insist upon forming partnerships. A partnership can be done but it should be out of free will and not under some pressure. We, the sole prop. and individual practitioners are at mercy of some bureaucrats and heartless, self centred senior professionals (who we vote for) who are most eager to get cream in their and their own people’s favour.

    It is not even clear, whether a sole practitioner will ever get SBA after 3 years. Pls refer new directives reg. SBA where it is quite ambiguous whether individuals & sole props. are outside the purview of Category IV or not. A clarification in this regard is highly solicited.


  19. ca rd badoniya says:

    Very Good Artcle

  20. CA Ashish Garg says:

    really an eye-opening article.
    Regulator must be active now and it is high time to take appropriate policy decisions.

  21. CA MBG Tilak says:

    This is an excellent article truly reflecting the ground realities of the profession, with certain lopsided decisons hampering the growth of the profession as well as depriving the opportunity of Sr Chartered accountants with several years of distilled experience in industry, commerce,audits , working in the profession after attaining superannaution in service , being equated with a new entrant in the profession.Alas ! How pitiable the situation is!, which I feel the apex members ought to examine, kindly all these issues and try to do justice in th interest of the profession.
    Certain audits/assignments ought to be exclusively earmarked for firms with less than 10 years of standing, and due weightage is to be given to an individul member who holds FCA continuosly for 25 or more years with ICAI,in service & starts practice after superannauation( as because he CA happened to be in service started 3 years back, the practice, his/her past FCA experience cannot be equated to Zero , while promoting such individual”s juniors to higher grade assignments in audits)This is true way of “Capacity Building Excercise ” ,in my opinion instead of holding seminars and further troubling the soleproprietors, financially.The C & AG audits allotments are to be liberally allotted to Sole proprietory firms, without insisting on net worth, details of balance sheets,removing petty bureacratic checks/controls,insisting on IT returns/service tax data/cross checkings, after all for not even a small value assignment, but for only empanelment & there is no guarantee that the firm wil be allotted with work, & the firm ghas to submit all data, at the cost of self respect, ( as these are not contracting/mfg firms doing commercial business; they out to remember CA firm is a professional firm , which do not advertise & promote business) with les than Rs1.50 lakhs audit fees category
    The ending of the article “Conclusively, In a very dignified manner, a dirtiest game has been played by those who are at the helm of affairs. The mapping of the timing of the wrongful decisions taken against the sole proprietors and their firms is a part of the conspiracy being hatched by the so called leaders” is marvellous truly refelcting the views & sentiments majority of sole-proprietory firms—BIGGEST THANKS TO THE AUTHOR for the mighty contribution to the article.At least now on, the apex needs to ponder over the decisions & help small firms of CAs

  22. Shreya Prasad kafle says:

    I Like Your Program
    Shreya Prasad kafle

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