The Institute of Chartered Accountants of India (ICAI) is planning to crack down on local chartered accountant (CA) firms that would indiscriminately use the brand names of the global firms they associate with. A high-powered committee of ICAI set up to look into the accounting loopholes that were exploited during the Satyam scandal has recommended that there should be clear terms and conditions between the Indian CA firm and the foreign one for use of brand names. The terms and conditions should be made known to the ICAI in advance for ratification.
A copy of the committee’s report that FE has obtained, states that the ICAI’s disciplinary council can consider “action to be taken” if Indian accounting firms continue to use international logos, in defiance of the terms and conditions. It said, “The council may consider action to be taken to ensure that the firms which have used the name and/or logo of their international network in their letterheads/professional documents in contravention of council directions on the subject rectify the same and ensure that no violation is committed by them.”
The practice of some representatives of Indian firms carrying two business cards-one of the Indian CA firm and the other of the foreign one to get business for the former-has also been reported by the committee.
In fact, soon after the Satyam scam was unveiled, the ministry of corporate affairs, headed then by PC Gupta, circulated a note that talked of the need to stop such practices.
The report was also critical about the nature of the arrangement reached between Indian audit firms and their foreign partners. The committee had, in fact, sent letters to Indian audit firms to share information, contract letters, copies of agreements and details of remittances between the two parties over the arrangement.
However, some firms chose to remain tightlipped on the matter and did not share the information with the institute. The high-powered committee categorically states that “some firms” have not furnished the details of the arrangement “especially those which have affiliations with the Big Four multinational accounting firms KPMG, PricewaterhouseCoopers, Deloitte Touche Tohmatsu and Ernst & Young.
The committee has noted that the terms & conditions of the arrangement between an Indian CA firm and an international one is made clear with details of the remittances received given in the partnership deed before Indian CA firms can use the logos. “Arrangement for sharing of fees/profit with other Indian CA firms with similar/identical name and with the multinational entity,” it said. Set up under former ICAI president Uttam Prakash Agarwal, the high-powered committee had sent its first report to the ministry of corporate affairs in July 2009. This is the second report, which is a continuation of the first one. The report would be taken up by the general council of the institute next month. The current president of the institute Amarjit Chopra had earlier told FE that ICAI would seek more powers from the government to tighten accounting standards.
Was this not known to the CAG and the past Presidents of the Institute? Why suddenly this untimely rise from deep slumber-it is bad for health.
Look into thyself, should be the motto.