ICAI President's Message – June 2013

Being chartered accountants, we are exposed to multiple and a variety of experiences and opportunities that give us courage and literally prepare us for entrepreneurism. Our professionals have brought a change in the entrepreneurial culture of our nation. Through our professional conduct, we are constantly presenting examples of ethical conduct in profession before our society.

As far as the growth in professional avenues is concerned, financial inclusion will be a key area, and we understand this. We will continue to play a key role in the economic development of our nation, while shaping our members to brace for the global challenges through convergence with the best accounting procedures and practices. We have to be at the forefront of economic activities.

The first day of July is observed and celebrated as Chartered Accountants Day by the Institute. Let us celebrate this Day this year too in a manner befitting the occasion. We have decided to undertake some activities at pan-India level so that the nation can feel the impact of our united efforts, which will also lead to all the more visibility of our profession. We are coordinating with Regional Councils, Branches and other programme organising units to celebrate this auspicious CA Day in a structured manner. Let us join hands and show our solidarity. I invite your suggestions for more and more socially and professionally-oriented celebratory activities and call for your enthusiastic participation in the same.

I am happy to inform our stakeholders that we have already notified the setting up of five new Branches of the Institute at Kishangarh (Rajasthan), Chittorgarh (Rajasthan) and Jhansi (Uttar Pradesh) under CIRC, and Satara (Maharashtra) and Navsari (Gujarat) under WIRC. Consequently, the number of Branches has gone up to 133 from 128. This increase in the number of Branches will help us in connecting with our society more effectively, while providing effective services to our members and students under the five new jurisdictions. Simultaneously, we are also working to expand our network abroad by setting up more foreign chapters, which presently count 21.

I am happy to note that the inflation has come down to below 5% mark, i.e. 4.89% in April. Reserve Bank of India says that it would take into account this falling inflation while announcing the mid-quarter review of monetary policy for 2013-14 in June 2013. Inflation has eased due to a decline in prices of food items. This is the lowest level of inflation since November 2009 when inflation dipped to 4.78%. Encouraged by this falling inflation, the Ministry of Finance has made a case for further rate cut by the RBI to boost the sagging growth. RBI has recently already cut the repo rate by 0.25%, to 7.25%.

Especially for the members who are busy completing audits for the year ending 31st March, 2013, I would like to reiterate that with respect to the Auditor’s Report, members should comply with SA 700 (Revised), SA 705 and SA 706, issued by the ICAI. An overview of Revised Auditor’s Report Format is being published in this issue of the journal also for your guidance and knowledge update.

We had voiced our reservations when the RBI presented its guidelines that all the publicsector bank branches having outstanding advances more than Rs 20 crore and rest of the branches only 1/5th every year will be subject to statutory branch audits. Earlier, this limit was  Rs 6 crore. Recently, media reports have said that even smaller bank branches need regular audit procedures as violations of KYC norms by banks have come to light, corroborating our stand on this issue. We have taken up this issue with the RBI and the Ministry of Finance and expressed our constant commitment towards the financial health of our nation. I am sure, things will improve manifold if audit procedures could be made mandatory for as many bank-branches as possible.

Recently, I attended the 77th Authority Meeting of IRDA in Hyderabad, which was also attended by its Chairman Shri T. S. Vijayan and others. This meeting took us further in our ongoing journey as a partner-in-nationbuilding.

Since chartered accountants have been recommended to do the financial audit under MGNREGA, a representation has been made to the Office of C&AG to fix up the remuneration for the said assignment to ensure not only equitable distribution across the country but also adequate compensation to the chartered accountants. The Ministry of Rural Development has mandated to provide 100 days of guaranteed wage employment in a financial year to every household whose adult members volunteer to do unskilled manual work. In this regard, the Ministry has asked the ICAI to submit a proposal with respect to financial audit under the MGNREGA, which is being firmed up. We have formed a group that will take this initiative forward with the Ministry. I am sure this will serve the cause of our society as well as our membership.

Union Finance Minister Shri P. Chidambaram while warning corporate giants against wilful defaults, had asked the banks to lodge formal complaints with the ICAI, if the auditors of the borrower have been negligent or deficient in their auditing. We are taking effective measures in this regard to keep the ethical values of the profession intact. We have communicated to the Secretary of the Financial Services of Ministry of Finance our willingness to extend all possible support in this regard. In the last 3-4 months, we have held multiple meetings in various regions across the nation to take up the disciplinary cases that came under the purview of our old disciplinary mechanism, i.e. November 17, 2006 and before, and have cleared almost all the cases (except a few).

We pay taxes for the civilized society, which can be likened to collective fuel which moves the wheels of national growth and progress. We chartered accountants bear a constitutionally mandated responsibility to keep this wheel running by ensuring the desired compliance. Let’s take up the tax audit in a most diligent and professional manner to the expectations of both clients and the Government. Let’s verify the accuracy and correctness of the books of accounts of the taxpayer in the spirit of the legislative intent behind introduction of tax audit by virtue of Section 11 of the Finance Act, 1984 by insertion of Section 44AB to the Income-tax Act, 1961 (w.e.f. 1st April, 1985). Let’s remember that the main legislative intent is to ensure proper maintenance of books of accounts and other records and providing transparency in the financial statements submitted to the department.

A CBDT notification (No. 34/2013 dated 01.05.2013) mandates that professionals have to certify and upload tax audit report in Form No. 3CA, 3CB, 3CD, etc., along with return of income through a separate professional window on income tax e-filing website. This will help both the professionals and the department in keeping track of their various tax audit reports. I wish you all the success in most effective completion of tax audits.

I would like to draw your attention to the Ministry of Corporate Affairs’ latest Circular which provides important clarifications on the provisions of the Limited Liability Partnership (LLP) Act, 2008 with regard to conversion of a partnership firm into LLP. It has been clarified that the LLP Act, 2008 does not provide for conversion of two or more firms into a single LLP. Clarifying further, the MCA has said that the provisions of section 58(4) (b) of the LLP Act, 2008 provide that on conversion of a firm into an LLP, as per the provisions of the said Act, all property, assets, interests, rights, privileges, liabilities, obligations relating to the firm and the whole of the undertaking of the firm shall be transferred to and shall vest in the LLP without further assurance, act or deed. Accordingly, if a CA audit firm, being an auditor in a company under the Companies Act, 1956, gets converted into an LLP after complying with the relevant provisions of the LLP Act, 2008, then, such an LLP, in accordance with the provisions of section 58(4) (b) of the LLP Act, 2008 would be deemed to be the auditor of the said company. The relevant appointee company may take note of such change in status of the auditor through a resolution of the Board. I call upon the CA firms and members concerned to take note of the above clarifications and comply accordingly.

We have always been cautious of the fact that the students pursuing CA Course who are potential members of the profession must undergo the rigorous practical training and also develop an all round personality so as to meet the contemporary challenges of the economic environment. As a consequence, the Council of the Institute had recently implemented the decision to impart GMCS Course in two parts. The Board of Studies has completely revised the syllabus for both the courses and brought out the new training material both for the students and the trainers. A number of programmes are also being organised for the trainers throughout the country. This would also ensure the standardisation in the delivery of the course throughout the country. The GMCS fee has been increased from Rs.  4000/- to Rs.  5500/- per participant per course, to be conducted from July 1, 2013 onwards.

Meanwhile, I am happy to take note of the encouraging response and acceptance for the e-Learning e-Initiative by students with 1,63,000 Student e-Learning Hours and 25,000 Students Registrations for CPT and Intermediate (IPC) Courses at http:// studentslms.icai.org within about 100 days of its launch.

As I read, I could not help but smile. As I read further, my smile became bigger. Indeed, smile is beneficially contagious and worth spreading. Remember, smile supersedes sadness of any type. It is always a pleasure to watch someone laugh without any inhibitions. There are those sophisticated smiles, grins and a little of this and that, but a roaring laughter is the one I like most and would also like you to enjoy your laugh. At times, we professionals may have to adjust our laughs if societal manners so demand, but laugh we must, because it is rejuvenating and refreshing. Dale Carnegie rightly said: ‘Make a man laugh a good hearty laugh, and you’ve paved the way for friendship. When a man laughs with you, he, to some extent, likes you.’ So, do practice a smile more often and pass it on. After all, even a newly born, knows the language of smile. As such, it is necessary for us professionals to practice smile and pass it on.

Whoever you are, whatever you are doing, whatever you are going through….Life, of late, might have been unfair to you, people might have broken your heart to pieces, you might be facing a challenge much bigger than what you can face, even if it feels impossible…. smile and pass it on! Think about anything that makes you laugh and laugh your heart out. And then see….things will feel better. Let’s spread smile.

Best wishes