Let us begin with the words of a Scottish financial journalist, B. C. Forbes: Without self-respect, there can be no genuine success. Success won at the cost of self-respect is not success. For what shall it profit a man, if he gains the whole world and loses his own self-respect?

Self-respect is fundamental to all merits. It permeates all aspects of our lives. We can use it in disciplining ourselves. To us, if we want to be respected, we will have to learn first to respect ourselves, as it comes first from our own inside. Our difficulty is that we do not realise our worth and, therefore, do not consider what we lose when we simply follow others. Losing our identity is no humility. Humility lies in recognising what we are. In fact, true self-respect will make us humble. It will make us think of ourselves neither too high nor too low.

All of us have responsibility towards the society we live in. Let us realise the position of our profession and understand that we should better displease others and do what we know is right than we make others happy by doing what we realise is unjust. It is time to display courage and speak the truth, and acknowledge with zeal what the English playwright George Bernard Shaw had once said: No man, who is occupied in doing a very difficult thing and doing it very well, ever loses his self-respect. We should respect our efforts, and, above that, ourselves. All practitioners of accountancy profession in India must respect their root, i.e. the Institute. We must always identify with our Institute which has given all of us reasons to smile and live with respect in our life. We must add life to the Institute’s standing by respecting and valuing it.

Let our profession stand tall forever with all its glory and heritage.

Now, let us get updated with some of the important proceedings and developments in the Institute in particular and accountancy profession in general over the last month:

International Initiatives

18th World Congress of Accountants: ICAI Call to Curb Irregularities: The 18th World Congress of Accountants (WCOA) with the theme Accountants: Sustaining Value Creation, jointly organised by the IFAC and Malaysian Institute of Accountants (MIA), addressed various accounting issues utilising a pool of about 200 internationally-known speakers from over 40 countries. Issues discussed included strengthening accounting professionals in emerging economies, integrated reporting framework and role of accountants in the future. This four-day Congress registered a record 6,050 delegates from 134 countries excluding some 1,000 students from Malaysia. The undersigned gave a comprehensive presentation on Fighting Corruption & Money-Laundering – An Ongoing Battle for Accountants. The presentation explained the basic understanding and causes of corruption and money-laundering while apprising the audience of the existing international initiatives to fight these evils of profession and suggesting the strategy and related role of external auditors in this regard. To us, it is a significant issue requiring immediate resolutions and that is why we will address this in our January 2011 International Conference on Accountancy Profession too. There is a need for IFAC to sit up and think in terms of some aspects of reporting to cover issues concerning corruption where there are such indicators. Expressing an opinion merely on true and fair view may not be only aspect which society may expect the auditors to report upon. The ICAI Vice-President CA. G. Ramaswamy spoke at length and stressed particularly on the vigilant aspect of audit profession while chairing a session on International Auditing and Assurance Standards Board (IAASB) – A Global Perspective in which the IAASB Chair Mr. Arnold Schilder presented a paper.

On the sidelines of this Congress, we had meetings with the New Zealand Institute of Chartered Accountants, where we were assured that there would be negotiations to finalise the by February 2011. We also had meetings with CPA Australia to discuss the strategy for furthering the mutual relationships between the CPA, Australia, and the ICAI.

Singapore Accountancy Convention: ICAI Focuses on Ethics and Governance: We had the opportunity to attend Singapore Accountancy Convention organised by the Institute of Certified Public Accountants of Singapore recently, where the ICAI was a supporting organisation. The undersigned delivered a session on Ethics and Governance and stressed that ethics have to be adhered to especially by bigger firms keeping in view of some of the recent instances of violation of ethics, while emphasising the issue of family-owned businesses. Even in family-owned businesses there has been a rise of professionalism. Responding to a question, the undersigned, however, stressed a need of ethics and corporate governance in bigger auditing firms connected herwith. The theme of the convention A Profession on the Move captured the dynamism and vibrance of the accounting profession and acknowledged the realities of an increasingly-globalised world. Then, the undersigned and ICAI Vice President CA. G. Ramaswamy met ICPAS President Dr. Ernest Kan to discuss the wish-list shared between the two Institutes, and had fruitful discussion on carrying forward the MoU dialogue.

Meetings with Federal Ministers of Australia, CPA Australia and ICAA: The undersigned along with ICAI Vice-President CA. G. Ramaswamy visited Sydney in Australia, where we met the officials of both CPA, Australia and ICAA to discuss the various aspects of the MRA already entered into. We would like to mention specially the name of Chief Executive of CPA, Australia, Mr. Alex Malley, as he was willing to share dais with us on a number of accountancy-related issues. In fact, Mr. Malley suggested on the need for a group which may have future implications in the issues of IFRS Convergence. The undersigned also met Mr. Bill Palmer, Director Asia, ICAA, who was quite keen on conceptualisation of an accounting body for Commonwealth countries to develop a network for the benefit of global accountants. He suggested us for a membership of the International Forum of Independent Audit Regulators (IFIAR). We also discussed about sharing our respective professional opportunities and easing off of immigration rules in the interests of our members. We also had discussions with the Federal Member of Berowra Hon’ble Philip Ruddock and the Parliamentary Secretary to the Prime Minister Senator the Hon’ble Kate Lundy in a social function organised by the Indian chartered accountants and other eminent Indians in Australia. We visited and met the Senior Manager (India & UAE Desks, International Markets and Trade) from NSW Government Ms. Linda Taylor. We then met the Indian High Commissioner in Australia Sujata Singh. We are really happy to share with all of you that we were promised an unconditional support from them. The undersigned, along with the Chairman Sydney Chapter of the ICAI CA. Yateender Gupta proceeded to Canberra.

Annual Toronto Chapter Programme: The undersigned attended the fourth Annual Programme of the Toronto Chapter of ICAI along with the ICAI Vice President CA. G. Ramaswamy. We spoke at length on CA profession in India. While pointing out to the condition of rising Indian economy, the undersigned predicted a possibility of reverse brain drain, as opportunities are on a rise on home soil. High Commissioner of India Shri Shashishekhar M. Gavia, who was present on the occasion, addressed our members of the Chapter. Mr. Steve Gupta, President & CEO, Easton’s Group of Companies, delivered the keynote address. The programme got an overwhelming response.

ICAI Accompanies MCA in Australia Visit: A senior delegation from the Ministry of Corporate Affairs headed by its Secretary Mr. R. Bandyopadhyay visited Sydney and Canberra in Australia recently to have in-depth discussion with senior Australian Government functionaries. The delegation consisting of representatives of ICAI, ICWAI and ICSI met Dr. Ken Henry, Secretary of the Australian Treasury, Govt. of Australia, and they had an exchange of stance on economic policy and regulatory architecture at macro level and learning experiences and possible mutual synergies in governance, CSR, investor education, technical standards implementation, in particular roadmap to IFRS, etc., at micro level. Our Central Council colleagues CA. Vinod Jain and CA. Abhijit Bandyopadhyay, and ICAI Additional Secretary Shri Rakesh Sehgal represented ICAI in the delegation. Both the sides agreed to work together and play a leadership role in the region by adopting a joint voice in various international forums in areas of emerging paradigms. The delegation also met Financial Reporting Council Chair Mr. Jeffery Lucy and discussed corporate and standard business reporting, corporate governance and investor protection. This visit assumes importance in the wake of emerging trade scenario. Both sides agreed to leverage upon mutual synergies and regularly interact so as to jointly work on commonality of issues. Indian High Commissioner in Australia Sujata Singh also accompanied the delegation in these two meetings.

Developments in Convergence with IFRS

Converged Accounting Norms- Agriculture and Banking Sectors: In course of our efforts of introducing accounting norms in India converged with globally-adopted International Financial Reporting Standards (IFRSs), we realised that we couldn’t go ahead with the draft accounting standard for agriculture of the IFRSs due to our nation’s concerns in assessing the fair value of the agricultural sector. When we decide not to announce the standards for agriculture, we should understand that it would not have any impact on our proclamation to converge our accounting standards with the IFRSs from April 2011. India is not the only one that has decided to defer the Standard on Agriculture. In agriculture, India may have diverging accounting norms or ‘carve outs’ as compared to the IFRSs.

ICAI Proposal on Tax Implications Emanating from Convergence: We take this opportunity to inform that we had set up a Group consisting of nominees from the Ministry of Finance to identify tax implications emanating from the IFRS convergence. The Group prepared a draft report identifying options to be adopted for achieving tax neutrality. The Group has met the MCA Secretary, where it was requested to submit a revenue-neutral proposal that should be acceptable to the Ministry and, at the same time, compatible with the IFRSs while meeting the require-ments of corporations. The Group has decided to include only feasible and practically possible alternatives in the report to be given to the Government. The Group has authorised our Central Council colleague CA. Jayant Gokhale to discuss the possible alternatives with the officials of the Ministry and, thereafter, formalise the detailed aspects of alternatives for the final Report to be submitted to the Ministry.

More Public Recognition: Tamil Nadu Street Named after ICAI

It is a matter of pride and joy that the Sankaraperi Panchayat Union in Tamil Nadu has recently approved and sanctioned for naming a street as ICAI Salai (road) that houses our Tuticorin Branch of SIRC. We sincerely thank the Councillors of the Union for approving the same, and duly congratulate the Chairman of the Tuticorin of SIRC, CA. H. Raman, for the recognition.

ICAI Offers to Assist in Commonwealth Games Irregularities Probe

As you might be aware, the Hon’ble Prime Minister of India has entrusted Shri V. K. Shunglu, former Comptroller and Auditor General of India, to head a high-level Committee to probe the alleged irregularities in the 2010 Commonwealth Games held in Delhi. We would like to share with you that we have sent a letter to Shri Shunglu offering our services. The response in the matter is awaited.

NABARD Relents to ICAI

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We are happy to inform our members that on our continuous persuasion, the NABARD (National Bank for Agriculture and Rural Development) has agreed to delete the clause pertaining to negotiation from the policy circular regarding fixation of the fees of the auditors of State and District cooperative banks, which was to be made applicable from next year onwards. We are sure that the removal of the negotiation clause while fixing fee would ensure more transparency and equitable distribution of work among auditors of the State and District cooperative banks. Several inhibitions like provision enabling change in auditor every year still remain in the process which we will continue to pursue with the Bank.

ICAI Stands Tough against Fraudulence

We do not need to undergo any change post-Satyam fiasco in our system, but there is a need to process our disciplinary cases faster. Action against our members, i.e. auditors, is a reality, however the matter in some cases is sub-judice. We have made progress in cases, where stay order has not been granted. Currently, the scheme of our disciplinary mechanism does not allow us to proceed against erring firms. Therefore, we have proposed certain amendments in the Chartered Accountants Act, 1949. If amendments are approved, it will help us act against the erring firms, although in absolute exceptional circumstances. Let us understand that Satyam must never be identified as an accounting failure, rather it is a failure of all pillars of corporate governance, i.e. regulators, independent directors, shareholders and promoters. To update on the matter, the two auditors associated with the Satyam fiasco had been granted a stay order against the proceedings of our Disciplinary Committee on their petitions, but their petitions as well as the stay order were dismissed by the Hon’ble High Court of Delhi after hearing the counsels of both sides. Unfortunately in this case, only auditors’ role has caught the public attention. We, of course, do not want to defend the auditors involved in that episode, which has become a case study for us to apprise our members about the significance of taking third-party confirmations. Role of independent directors of audit committee and search committee overseeing the function of companies needs to be redefined. It becomes difficult for auditors to ascertain the authenticity in the absence of confirmation, as forensic audit cannot be carried out for every audit.

Initiatives for Members

300th Meeting of ICAI Council – Some Significant Decisions:

Regarding the formulation of guidelines for revival of derecognised Study Circles, the Council decided that a Study Circle which was earlier derecognised by the Council may be revived by the Continuing Professional Education Committee subject to the compliance with certain norms to be specified in this regard.

Regarding consideration of the issue regarding recognition of fair value changes in investment property, the Council agreed with the view of the ASB that instead of recognising the changes in fair value in investment property in profit or loss, where an entity adopts the option of measuring investment property at fair value as per the draft AS 37, Investment Property; the same should be recognised in other comprehensive income. The Council authorised the Chairman, Accounting Standards Board, to place the changes suggested in the Accounting Standard before NACAS. If the change is approved, it will eliminate the volatility of Profit & Loss account.

With a view to ensure professional competence of our members, the Council decided that where there has been a gap of 5 or more years between the removal of name and application for restoration of name, if the member applies for Certificate of Practice, he should undergo a specified refresher course of a duration of 30 hours in the modules to be developed by Board of Studies, either in physical form during weekends or in the online format. Alternatively, such members could attend CPE programmes and earn 30 CPE hours before the Certificate of Practice is restored/granted. The Council also decided that for the persons who have passed the Final Examination and become eligible for enrolment as a member but have not applied for membership within 5 years from the date of their becoming eligible should undergo the aforesaid refresher course for getting enrolled as a member. The same is subject to the changes in the regulations.

Regarding modalities to be recommended for holding the office of Office Bearers for the year 2011-12 and 2012-13 for those Branches where the majority of members of Managing Committee have held the office of Chairman in the earlier years, the Council observed that holding of post of chairman of a branch again is not acceptable either from good governance point of view or from ethical point of view and therefore the Council decided that the Chairman of a Branch after demitting office should not seek re-election for or hold the post of Chairman of the said in the year 2010-11 and 2012-13. However, he can hold any other post. If in the case of a for the years 2011-12 and 2012-13, no member of Managing Committee is left who has not held the position of Chairman in earlier years, the Committee will co-opt a member who will be the Chairman of the said Branch for the year 2011-12 or 2012-13 as the case may be.

To help our members carry out assurance engagements at Service Organisations, the Council cleared the Standard on Auditing (SAE) 3402, Assurance Reports on Controls at a Service Organisation, formulated by the Auditing and Assurance Standards Board.

The Council also decided on the development of alternative dispute resolution mechanism for dealing with the disputes. The details about this decision are elsewhere in the Journal in this issue. This decision will help in early settlement of disputes of our members as well as of students.

Capacity Building Measures: We have called a meeting of big Indian firms for discussing the consolidation and networking strategy how they can play a key role in building small and medium practitioners. We seek their help in capacity building exercise through making available sophisticated toolkits and other relevant research. We are of the opinion that bigger firms rather than taking over smaller firms and creating monopoly should do hand-holding exercise and improve the quality of audit profession at large.

C&AG Ready to Reconsider Empanelment Criteria: It is a matter of satisfaction that the office of the Comptroller and Auditor General (C&AG) of India has agreed on our request to re-consider the empanelment criteria for preparation of panel of CA firms for conducting audit of public-sector undertakings. A group has been constituted for the purpose consisting of the undersigned, ICAI Vice President CA. G. Ramaswamy and our Central Council colleagues CA. S. B. Zaware and CA. Pankaj Jain.

Issue of Surrogate Practices: It is ironical for the profession in India that some well-known global accounting firms are operating their businesses in India through surrogate means, i.e. without even being registered in the country. We have raised questions on their modus operandi, as these auditing firms operate through their member-firms in India. We take a serious view of their practices being carried out in such a manner. We have approached the Government too in this regard. While auditing reports are signed on behalf of their member-firms, business is usually taken on behalf of these global parent firms. A debate has arisen how these firms can be made accountable to the disciplinary mechanism of the ICAI. We have called a meeting with our past-Presidents to seek their views on the matter.

25th Regional Conference of WIRC: The undersigned along with the ICAI Vice-President CA. G. Ramaswamy, attended the 25th Regional Conference organised by WIRC of the ICAI in Mumbai recently. Shri Chhagan Bhujbal, the then Deputy Chief Minister (now Cabinet Minister) of Maharashtra, was the Chief Guest at the Conference. We would like to inform that the Conference was well-organised and had a very good participation. Among others, CA. N. P. Sarda, CA. T. S. Vishwanath, CA. T. N. Manoharan and CA. M. Chitale also addressed the Conference. Council Members from the Western Region were also present on the occasion. We would like to offer our compliments to the Chairman of the WIRC and his team for successfully organising this Conference.

Two-day National Conference on New Paradigms of Competitiveness: Two-day national conference of ICAI on New Paradigms of Competitiveness: Positioning CAs for Tomorrow’s Challenges was held recently in Bhubaneswar. The undersigned addressed the gathering on Contemporary Issues in Auditing Special Emphasis to Reporting Compliance in the Changed Environment. Other distinguished speakers included our Central Council colleagues CA. Nilesh S. Vikamsey, CA. Sanjeev Maheswari, CA. S.Santhanakrishnan and CA. Sumantra Guha. Finance Minister of Orissa Shri Prafulla Chandra Ghadai was the guest of honour on the occasion. Other issues that were discussed included Wealth Creation – A Professional Perspective, Direct Tax Code Bill 2010 – Changes in Conceptual Approach, Corporate Fraud and Forensic Audit, etc. During the Conference, we proposed to set up a Centre for Excellence in Bhubaneswar to facilitate our about 600 members in the state, i.e. Orissa, and, in response to that Shri Ghadai immediately assured us for the land. We thank him for display of this noble intention.

Study Material for ICAEW and CPA Australia Members: We are really pleased to announce that the Board of Studies has released the study material for the Members of the ICAEW and CPA, Australia, who wish to seek membership of our Institute.

 

Initiatives for Students

Common Proficiency Test: The Council at its 300th meeting reviewed the requirement for passing the Common Proficiency Test and decided that a candidate shall have to obtain at one sitting, a minimum of 30 per cent marks (out of maximum marks specified by the Council for each Section) and a minimum of 50 per cent marks in the aggregate of all the Sections, subject to the principle of negative marking, in a manner as may be specified by the Council from time to time subject to proposed amendments in the regulations approved by the Central Government.

Revised Final Study Material Available by January 2011: We are really happy to inform that the Board of Studies had released the revised Final study material, which has been updated and modified. Entire study material along with Practice Manuals would be available at all our Branches by January 2011.

Residential Course at Centre of Excellence, Hyderabad: We are really pleased to inform that the registration for the second batch for six-week Residential Course at the Centre of Excellence, Hyderabad, has received an overwhelming response. The third batch will start from January 18, 2011.

The Board has proposed to run these batches on continuous basis. A three-month Residential Course at NIFM, Faridabad, has also been announced. However, in future, duration of residential courses at NIFM, Faridabad, will also be of six weeks instead of three months so as to bring uniformity in respect of such programmes conducted across the nation.

International Conference of Students in Delhi: The Board of Studies has proposed to hold an International Conference of Students in Delhi on December 28-29, 2010.

Our Past-President CA. V. Rajaraman rightly said in his address to the 300th Council Meeting: It is a welcome sign that growth in the profession, as is witnessed, has spread to most cities and towns instead of concentrating in the state capitals and big cities only. It is bound to migrate to taluk headquarters and smaller towns. This would be necessity of the day and the only way perhaps for the profession to grow. Then, he reminded us of the existing challenge: Membership should be prepared for this change and it may not be a difficult task since social amenities are fast reaching the panchayat level and smaller towns. We have always accepted and addressed the challenges that come in our way. We welcome them as we know they awaken us, strengthen our soul and make us courageous. December adds to our challenges, as we realise: time is passing by and that we have to accomplish a lot more.

December also reminds us of celebrations. On the eve of Christmas, let us take this opportunity to wish everybody- let us vow to give our heart to friends and our forgiveness to foes. Let us display our tolerance to adversaries and offer our services to clients. Let us set good examples before the young and pay respect to the old. Let us present our charity to all. Let the warmth and joy of this festival bring all of us closer than ever.

I wish all of you a Merry Christmas!

CA. AMARJIT CHOPRA

President, ICAI

November 26, 2010

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