The Union Cabinet on 1st March 2018 approved the establishment of much awaited NATIONAL FINANCIAL REPORTING AUTHORITY. This created one post of Chairperson and three posts of Full Time Members against a provision of fifteen members in law and one Secretary for NFRA. The establishment of NFRA is as per section 132 it’s been five years since the enactment of the Companies Act, 2013 and only a few sections have yet to be notified. Most notable amongst them was the provision to create a National Financial Regulatory Authority – an audit super-regulator of sorts.
LONG WAY TRAVELLED
The concept of establishing NFRA was introduced in the draft law and endorsed by the Standing Committee on Finance – Fifteenth Lok Sabha. In its August 2010 report, the Committee approved the creation of a new body that would not only set and oversee auditing and accounting standards but also to monitor the quality of audit undertaken across the corporate sector . Later Since the same has been endorsed in another Parliamentary Committee report, by a government-appointed company law committee and by the Finance Ministry and Ministry of Corporate Affairs, across two governments.
However, the Institute of Chartered Accountants of India opposed its creation from the first day of its appearance. The reason was obvious that the powers of this self-regulatory professional body shall directly threaten by any such move. ICAI tried to impress the Government that the creation of such authority may lead to a conflict with the ICAI. However, their objections were rejected by the Parliamentary Committee in 2012. At this stage, ICAI put forward his best step and claimed that the matters of professional misconduct committed by a chartered accountant or a CA firm are first referred to the ICAI “which may refer it to NFRA for final action”. In short – ICAI should be retained as regulating authority. But that was rejected too.
The failure of ENRON resulted in the introduction of stringent self-regulation of the U.S accounting profession in 2002, a year after the Enron scam broke and prompted the legislation of the Sarbanes-Oxley Act that ushered in new corporate governance and disclosure requirements. Here, the exposure of Satyam Scam has resulted in floating the same idea to have such type of authority. The companies Act 2013 duly carried its intentions through section 132 to create such authority. However, the latest PNB scam & SC judgement over BIG 4 functioning has made it inevitable to postpone it further and the Union Government has approved its constitution finally setting aside all the ICAI objections.
ICAI GROSSLY FAILED AT STANDING COMMITTEE
ICAI made many serious attempts to derail the process of establishment of NFRA. However, they received the first blow when section 132 has become part of Companies Act 2013. As the sections of companies Act were being notified in the phased manner, ICAI was hopeful for its non-notification. After Companies Act 2013, ICAI lobbied heavily for its non-creation. The Standing Committee report, published in December 2016, devoted 8 pages to discussing the NFRA issue. It started by listing the many arguments put forth by ICAI.
- It shall result in Multiple regulatory bodies,
- ICAI is a world-class regulator,
- NFRA will be a costly affair,
- Unavailability of adequate competent personnel.
The report quoted the ICAI as saying “…the CA fraternity is in the process of coping with new changes such as penalties, rotation, restricted services, Internal Financial Controls over Financial Reporting and other aspects imposed by the Companies Act. The profession would, rightly, need some more time to understand and assess the expectations of a NFRA regime which, in our view shall not be notified.”
HOWEVER, determined MCA countered ICAI by the lengthy arguments in favour of creation of NFRA.
- In many countries outside auditors perform the important gatekeeper function.
- The number of independent audit regulators worldwide is up from 18 in 2006 to 51.
- The NITI Aayog, in a separate matter, criticised the self-regulatory structure of such professional bodies.
- An international consultant engaged by SEBI said “the ICAI’s oversight is passive in nature and with limited focus on active investigations”.
- But the clinching argument made by the MCA is in the numbers it produced regarding ICAI’s disciplinary mechanism. Of the 1,972 cases taken up by the Disciplinary Committee/Board of Discipline of the ICAI, only in the matter relating to Satyam Computers have the members been permanently removed.
- Penalties of one year or more have been imposed on members in only 14 of these cases. In a majority of the cases, the members have been found as not guilty. Further, in majority of the cases where members have been found guilty, they have been merely reprimanded or cautioned.
MCA FUMED OVER NON ACTION ON 132 SUSPENDED LISTED COMPANIES
Astonishingly, the MCA noted that the ICAI has not moved even on complaints made by the Ministry. “It may also be pertinent here to draw attention to the reference in November 2015 to ICAI by MCA for examining the role of auditor and possible misconduct on their part in case of 132 listed companies whose scrips were suspended by SEBI for abnormal price rise which was not supported by the fundamentals of the companies, non-existent companies, etc. and on which even preliminary action had not been initiated by the ICAI despite several reminders.” Thus, reiterating the need for an independent audit regulator the MCA stated the NFRA would be established by the end of fiscal year 2016-17.
ICAI MOVE GOT SUPPORT
However a relief came to ICAI when Parliamentary Committee ignoring a provision enacted by Parliament itself and despite the above stated powerful submission by the MCA, the Committee concluded in its report that the existing mechanism under ICAI should be streamlined and strengthened “without needlessly adding to regulatory levels”. Though, this was an attempt to subvert the will of the Parliament. However the demoralised ICAI found it significant development and cheered its achievement.
The Standing Committee on Finance (2014-15), Sixteenth Lok Sabha in its thirteenth report on Demands of Grants (2015-16) of Ministry of Corporate Affairs has inter alia made following observation/ recommendation in the para 81:
“The Committee note that National Financing Regulatory Authority (NFRA) has been set up as an oversight body having quasi-judicial authority including suo moto investigation powers in cases of professional misconduct by a Chartered Accountant/firm of Chartered Accountants, imposition of penalty thereof, debarring members of the Institute of Chartered Accountant of India (ICAI), if proved guilty, etc. The Committee further note that the constitution of NFRA is a result of the recommendation of the Standing Committee on Finance which examined the Companies Bill, 2009 and recommended that the scope of the National Advisory Committee on Accounting Standards (NACAS) as included in the Companies Act, 1956 should be expanded not only to set and oversee auditing and accounting standards, but also to monitor the quality of audit undertaken across the corporate sector. The Committee further observe that similar oversight bodies also exist in other countries, for example, Financial Services Authority (FSA) in United Kingdom and Public Company Accounting Oversight Board (PCAOB) in United States of America. However, as issues relating to conflict of mandate with regard to disciplinary matters between the NFRA and the Act governing the Institute of Charted Accountants of India have been raised, the Committee desire that the Ministry may ensure that in the process of constituting NFRA, it does not create two parallel jurisdictions, governing the same issue. The Committee would like the NFRA to function as an oversight body without any jurisdictional conflict or overlap. This aspect may be addressed, when the rules governing NFRA are finalised by the Ministry.”
NOW NFRA IS A REALITY
Notwithstanding anything contained in any other law for the time being in force, the National Financial Reporting Authority shall—
(a) Make recommendations to the Central Government on the formulation and lying down of accounting and auditing policies and standards for adoption by companies or class of companies or their auditors, as the case may be;
(b) Monitor and enforce the compliance with accounting standards and auditing standards in such manner as may be prescribed;
(c) Oversee the quality of service of the professions associated with ensuring compliance with such standards, and suggest measures required for improvement in quality of service and such other related matters as may be prescribed; and
(d) Perform such other functions relating to clauses (a), (b) and (c) as may be prescribed.
CONSTITUTION & CHAIRPERSON OF THE NFRA
The cabinet approval created one post of Chairperson and three posts of Full Time Members and one Secretary for NFRA.
The National Financial Reporting Authority shall consist of a chairperson, who shall be a person of eminence and having expertise in accountancy, auditing, finance or law to be appointed by the Central Government and such other members not exceeding fifteen consisting of part-time and full-time members as may be prescribed: Provided that the terms and conditions and the manner of appointment of the chairperson and members shall be such as may be prescribed:
Provided further that the chairperson and members shall make a declaration to the Central Government in the prescribed form regarding no conflict of interest or lack of independence in respect of his or their appointment:
Provided also that the chairperson and members, who are in full-time employment with National Financial Reporting Authority shall not be associated with any audit firm (including related consultancy firms) during the course of their appointment and two years after ceasing to hold such appointment.
POWERS OF THE NFRA
The National Financial Reporting Authority shall—
(A) have the power to investigate, either suo motu or on a reference made to it by the Central Government, for such class of bodies corporate or persons, in such manner as may be prescribed into the matters of professional or other misconduct committed by any member or firm of chartered accountants, registered under the Chartered Accountants Act, 1949:
Provided that no other institute or body shall initiate or continue any proceedings in such matters of misconduct where the National Financial Reporting Authority has initiated an investigation under this section;
(B) have the same powers as are vested in a civil court under the Code of Civil Procedure, 1908, while trying a suit, in respect of the following matters, namely:—
(i) Discovery and production of books of account and other documents, at such place and at such time as may be specified by the National Financial Reporting Authority;
(ii) Summoning and enforcing the attendance of persons and examining them on oath;
(iii) Inspection of any books, registers and other documents of any person referred to in clause (b) at any place;
(iv) Issuing commissions for examination of witnesses or documents;
PUNISHMENTS & PENALTIES
Where professional or other misconduct is proved against any member or firm, NFRA shall have the power to make order for—
(A) Imposing penalty of—
(I) Not less than one lakh rupees, but which may extend to five times of the fees received, in case of individuals; and
(II) Not less than ten lakh rupees, but which may extend to ten times of the fees received, in case of firms;
(B) debarring the member or the firm from engaging himself or itself from practice as member of the Institute of Chartered Accountant of India referred to in clause (e) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 for a minimum period of six months or for such higher period not exceeding ten years as may be decided by the National Financial Reporting Authority. Explanation.—for the purposes of his sub-section, the expression “professional or other misconduct” shall have the same meaning assigned to it under section 22 of the Chartered Accountants Act, 1949.
NFRA ORDERS ARE APPEALABLE
Any person aggrieved by any order of the National Financial Reporting Authority issued under clause (c) of sub-section (4), may prefer an appeal before the Appellate Authority (Yet to be formed) constituted under sub-section (6) in such manner as may be prescribed.
(A) The Central Government may, by notification, constitute, with effect from such date as may be specified therein, an Appellate Authority consisting of a chairperson and not more than two other members, to be appointed by the Central Government, for hearing appeals arising out of the orders of the National Financial Reporting Authority.
(B) The qualifications for appointment of the chairperson and members of the Appellate Authority, the manner of selection, the terms and conditions of their service and the requirement of the supporting staff and procedure (including places of hearing the appeals, form and manner in which the appeals shall be filed) to be followed by the Appellate Authority shall be such as may be prescribed.
ESTABLISHMENT
The head office of the National Financial Reporting Authority shall be at New Delhi and the National Financial Reporting Authority may, meet at such other places in India as it deems fit. The National Financial Reporting Authority shall meet at such times and places and shall observe such rules of procedure in regard to the transaction of business at its meetings in such manner as may be prescribed.
OTHER ISSUES
(A) The fee for filing the appeal shall be such as may be prescribed.
(B) The officer authorised by the Appellate Authority shall prepare in such form and at such time as may be prescribed its annual report giving a full account of its activities and forward a copy thereof to the Central Government and the Central Government shall cause the annual report to be laid before each House of Parliament.
(C) The National Financial Reporting Authority shall meet at such times and places and shall observe such rules of procedure in regard to the transaction of business at its meetings in such manner as may be prescribed.
(D) The Central Government may appoint a secretary and such other employees as it may consider necessary for the efficient performance of functions by the National Financial Reporting Authority under this Act and the terms and conditions of service of the secretary and employees shall be such as may be prescribed.
(E) The National Financial Reporting Authority shall cause to be maintained such books of account and other books in relation to its accounts in such form and in such manner as the Central Government may, in consultation with the Comptroller and Auditor-General of India prescribe.
(F) The accounts of the National Financial Reporting Authority shall be audited by the Comptroller and Auditor-General of India at such intervals as may be specified by him and such accounts as certified by the Comptroller and Auditor-General of India together with the audit report thereon shall be forwarded annually to the Central Government by the National Financial Reporting Authority.
(G) The National Financial Reporting Authority shall prepare in such form and at such time for each financial year as may be prescribed its annual report giving a full account of its activities during the financial year and forward a copy thereof to the Central Government and the Central Government shall cause the annual report and the audit report given by the Comptroller and Auditor-General of India to be laid before each House of Parliament.
Author Bio
Auditors shall Not be at the Mercy of Auditee to get the Assignment
There shall be an Independant Agency to Allot any Assignment based on well laid Norms to All Practising Members and probably NFRA may suo moto undertake this exercise
Dear all, I welcome the step of GOI to establish NFRA as the concept of self regulation has failed in India because of its vast socio economic diversity, multiple laws on same subject etc. However concept of NFRA suffers from two disabilities as under….
1. Only CAs are covered in the law, while a large company is required face several audits that are directly or indirectly based on books of accounts, financial records and reports, but only statutory auditor can be punished if any other auditor finds some errors in financial records of the company.
2. NFRA is constituted under companies act, so other business entities can not be covered under the accounting n auditing standards etc unless enabling provision is made in respective laws.
Therefore in my opinion ICAI should suggest GOI to constitute NFRA under separate act of parliament and cover all professional bodies and all audit n financial reports in its fold. otherwise it will only become a heavy burden on industry. Our judicial system is best example of this. SC and HCs have proved to stall the prosecution more than to speed it up and the result!!! same is going to be happen with statutory audits…..
Excellent on the part of GOI. These CAs behave as if they are the protectors of the trade but in reality it is they who are friends, guides and philosophers of financial perpetrators. There must be end to this and the end has come.
As some are enthused at arrest of PC’s son, some are distressed . But, at least the intention of legislature is clear n its earnestness in driving away / out frauds . Demonetization was failed by CAs. No action has been taken against most of erring firms or members by ICAI. one Central council member in charge of taxation came for suggestions, just after winning election & reaching CC . He was told , first he should stop suicides by CFOs . He was furious. He was asked , if he was ready to listen to straight talks. And said, take most of corporates defaulting loans, Who are at first receiving end of financial mismanagement n misappropriation by promoters? The CFOs. So many of them either committed suicide on own or were compelled , being dragged into such pathetic but unavoidable situation …I’ve seen palpable conditions of some of them. In fact, I want to narrate stories of a small deceiving group of Kolkata( North East based), where the CFO was questioned about competence , by the graduate promoter, because he could not succeed in convincing Due Diligence Auditors to accept a transaction as genuine . The transaction was that CSA & CHA commissions were credited to them, to be debited again & credited to Share application collected other than in cash . There are so many public ltd cos, more dangerous than that one… mostly run by a specific business community that runs / rules Kolkata & think all native accountants as slaves n clerks . Who are the softest, hapless & first targets in d face of any scam??? The CFOs & downward officers in F&A. The learned scholar FCA of ICAI CC had no answer in store . He was told , don’t ask for introspection by CAs in big cos, where frauds do not happen . It happens in unscrupulous cos , who bunk PF , who bring truck loads of cash to pay salaries & who reduce salaries , & stop salaries as hay days fade off , as co advances n reaches d doorstep of an inevitable BIFR. We have seen how a top MNC giant of the world in cement had to forego its total of first Indian JV investment & how a paint tycoon became sick in just 12 months . Drainage n siphoning starting from raw material to sale prices ( cuts on back loading n front loading) to official trf of a part of CHA + transport charges to promoter’s pvt ltd co & other ventures
In fact, North East industrial policy of
rewarding IT, sales Tax & Excise exemption allowed such loots by miscreants. There are instances of availing excise exemption u/ notifn 32&33/99 for both cos after splitting the old co into 2 parts by showing a mill as an addition which never worked ,… just wire fence bifurcating 2 cos , no GRNs & road permits to record receipt of plant & machinery by the new unit & no power connection even ( power was thru theft ) and these cos manage to change MD of state Industrial development corpn , avail sales tax benefits for both the cos, s 80IC exemption u/ IT act for the new co & quash any amount of sales tax , I Tax & Excise demand notice. I was surprised to know that after getting excise exemption thru manipulated MTPH records
by the old co, a co whose actual production halves post excise exemption inferred that excise range office was gutted & range in charge was trfd away . No papers to prove the exemption basis remained . Political party in power both at state & center was an equal beneficiary in such scams , & obviously , thru the minister at helm then n now , under different political hues . Tobacco was included in notifn 32&33/99
& all tobacco majors set shops in Assam with hardly any investment. With an investment of
just Rs 50 lac , people minted over Rs 50 crore of excise benefits . And on 23.1.2001 tobacco
was excluded from the list …who suffered?
We the employees , starting from F&A .Working for such cos is a real experience, where IOUs comprise 95% of cash in hand balances year after year & where new working capital loans are used to repay old loans & CFOs are rewarded only if they can make available public money for easy looting by promoters . I have seen my CFO in that co go lunatic , after making blunder of joining that co leaving a reputed cement giant. We, who have hardly practiced ever & toiled hard in staying afloat in moribund delta…New cos had been opened , NEDFI money wasted n depleted left n right , without any proper land records for new co , no entries for transfer of minerals from captive mines of parent co to the new one ( since such trf is illegal) , all fake investment records of building , plant & machinery , and all assessments u/ income & sales tax acts & excise audits duly completed….Transport subsidies in double / triple of actual dispatches have been availed in North East , for years , without trf of finished goods inter state . All these have been known to all governing bodies, govt audit mechanism , & govt machinery under political leaderships . A lot has to be done to change all that , to uproot all the malice , because political will shall always lack & corruption always take wings under all political hues & colors . All d subsidies n exemptions have been designed to facilitate looting of Exchequer .
Hope it ends cornering of large Government Audits by a few
Very Good step.
I will also request to Government to make independent body for ICAI examinations so that it may also be got rid of so called unknown politics and probable biasim in profession where some see clear path to success while some fail to see that same path. While ICAI just remains in moot mode, because ICAI is nothing but is through its probable biased members for education, training and examination. Where ICAi just sits to see how well it had succeeded top grab the cream of society mostly only from already in profession society and it happens without any sincere suitable efforts by ICAI at the ground level for education and training. So many coaching institutions are telling the story of ICAI system of education and training. Are the members sitiing with closed eyes or they are just happy to rip the money for the responsibility of ICAI which it does not do, but such coaching institutions are doing.
So, Government please look into this seriously and stop memebrs from running coaching institutions and render ICAI liable for its lowest performance in the field of providing suitable quality education and training sufficient to clear the examinations. But members are just happy in this vast politics of making money.
NFRA is a reality. It is time for our profession to earn the respect it deserves by conducting itself to meet the high expectations of all stake holders. Technical correctness will have to be supported by propriety. Changes should be brought about to build true independence in to the audit function – in the area of appointment of auditors and the fee paid for auditing and other services.
NRFA is a reality. It is time for the profession to introspect and resolve to earn the respect it deserves from all stake holders by its conduct by performing its duties in letter and spirit as laid down in texts. It is not sufficient to be only technically correct but the need of the hour is propriety. As Hypocrates oath for doctors we may re-invent our oath to integrity.
We analyse all laws but do we internalise the rationale of the same? is a question to ourselves.
Now that NFRA is a reality let our profession live up to the expectations from our profession; let us mend bridges, re-assure the stake holders of our relevance and dependability; something like the oath of Hypocrates fro doctors should be put in place and followed in spirit.
Despite repeated “warnings” based on numerous systemic failures, the ICAI , has not taken decisive and timely action against erring members as also the big five ( which have substantive clout ). It stands to question whether a “politically” elected body has the independence to act in fairness and decisively with speed. Eight years is no speed at all and definitely not decisive. Decisions in such cases must be taken within six months. That the GOI is clearly usurping a role
of formulating standards envisaged by an act of parliament under which the ICAI was formed body is concerning is a no brainer to visualize as possibly a conflict of interest . But what are the options and solutions at a national level , considering an under-performing ICAI ? A simple objection based evidenced by gross under-performance in a major role by the ICAI is not an answer that is either adequate or acceptable. The “uncle” and “brethren” approach cannot possibly extend to disciplinary measures, which need ruthless time-bound action. Or else , the ICAI shall face situations similar to those being alleged in the legal system . Similarly, has the ICAi ever suggested to the GOI to disclose all GOI officials whose next-of-kin have been hired in various slots that could create conflicts of interest? In India , the case of “conflicts of interest” does not seem to apply or is seemingly enforced sparingly . Naturally, this has to be done in a logical manner to avoid disruptions. But it needs to be done. Clearly, disclosures are necessary even at the GOI level.
The Real Question is
Do We need to be afraid of the NFRA ?
Practically who should be afraid of NFRA ?
Why should a CA be afraid of NFRA ?
Which CAs should be afraid of NFRA ?
I am extremely happy that there is an independent regulator. There does not seem to be any other way to clean the rot.
Having been 35 years in the profession, many of us had seen this coming. Not only was the ICAI becoming largely a decorative body, aimed to benefit only the few who literally lobbied their way into various Regional Councils every two years; it has done little to raise the bar of Professional Ethics of its members, as also bring forward effectively before Govt., pertinent matters effecting members. In any case, except for getting hundreds of photos clicked with the high and mighty in elaborate, meaningless and expensive functions, it has remained a somnolent dinosaur, of the few, by the few and for the few. Good that this has happened @!!
Time and again it is proved that scams are taking place in which either governments or investors are getting cheated; but the auditors bathe in holy waters. It is no secret individual members act as conduits of corruption with tax authorities and other agencies. This institution failed to regulate itself and its Members; so an alternative has to be worked out by the government. All professional bodies have failed to control its members from acts of even willful negligence.
throughput the focus of icai is on exams, so it is evolved like the cbse/iscc schools with insight into quality of study material etc compared general students. however as it is observed in most of the north cities students having done cbse/icse upto xii board start deteriorating since for graduation arts/commerce/science (other than engg / medicine/law) students gets pooled with all and sundry and start rubbing the mawa-khaini from graduation. same is fate of icai – their involvement on members in practice and upgradtion and monitoring of audit and final accounts is weak compared to reasearch and updation in medical, engineering and legal professions the accounting profession rigor of professional conduct is weak.
Good news that NFRA has been constituted. ICAI has become a sleeping body. At least from now onwards CAs would check the whole accounts and not test check and give a certificate. CAs involved in the scams should be debarred from practise for life. Atleast ICAI should have said sorry to the country for its pathetic show.
Amreshji , certainly it is alarming bell for CA fraternity.
All CAs are not economic cheats, but every financial cheat has one or more CAs involved along with. No financial scam can occur without involvement of CAs. The aim with which this institutions was formed, has bn totally negated, and working in 180 degree opposite direction.
Like, all Muslims are not terrorists but almost all terrorists in world are Muslims.
All auditorships , just like police men and law managers are meant to guard the society from evil doers. It is not happening. They take cover under various laws and sub laws and use their clout with taxation dept to avoid penalties. In such a situation how can the ICAI claim glory! They are no better than the constable on the beat in a village. All of them need an independent monitor and huge computeristaion programme to bring their work under control.
The article is as verbose and cloudy just as the the little read and much little understood audit reports. Not worth spending a second on its reading.
Whats’ the fun in creating the New Governing Body like NFRA when
– the head of the Finance Ministry (the ultimate Governing Body) can make it dance to its tunes,
– the need of the hour is to have stringent laws to penalise the law violators, despite the position held by him,
– I can say with confidence that all is not well in the CA fraternitys’ affairs,
– the time period of conducting statutory audit by an individual or a a firm should be restricted to maximum two years,
– even the tax auditors need be other than the statutory auditors,
– better if like Govt Audit the statutory auditors as well as tax auditors are nominated by the ICAI,
– the pentality for misconduct by the statutory auditors need be stringent, rather the SA be debarred from taking up the audit before getting discharged of the allegations,
Thank you Amresh ji for bringing the related facts . Can we say it LOKPAL to monitor the CA.
No CA should be the member in NFRA..Public Company Accounting Oversight Board (PCAOB) in United States of America completed the enquiryon Sayam in10 months and fined PWC India and restrained the firms from certifying accounts under USGAAP for two years. ICAI took almost about eight years and that also only when a new member became the president and also a mild punishment of cancelling the membership of two members without any substantial comparable fine and penalty for dereliction of duty as imposed by PCAOB..No action was taken against another local CA of Hyderabad, who was outsourced the audit of Satyam. He was not proceeded against by PCAOB since he was not a member of PWC and not involved in certifying USGAAP accounts. PCAOB took up the Satyam case suo motu. But how many cases were taken up by ICAI suo motu in India.Th council members have to depend on votes of the members in the constituency and why should they esquire cases against their own colleagues, when they can enjoy the fruits of being a member of the CA Council at their grace of giving Votes?
In the 2015-16 report page 91 it states u/s 21B enquiries in 94 cases was complete d including cases of earlier years; but in the tble below, it states that eqnuiry was completed i78 cases inclding thoseof earlier eyears. It oes notmention how many of the earlier year cases were decided. But it states that out of these punishment has been awarded in 21cases. But there is no mention of the nature of misconduct and what punishments awarded in each case. If they have mentioned the names of CAs, then it would be a deterrent for the other CAS from committing the similar mistakes;.
If it is a regulatory institution , it should not involve itself in recruitment of CAs and organizing recruitment melas. There is no powers to the Institute except for conducting examinations to keep up the standard of CAs and to regulate their profession by disciplinary action. It can publish articles of practical experiences of members in conducting various audits to educate the new CAs. But this is missing.
ICAI must object
Typo error in 1st para -National Financial Regulatory Authority – May pls correct. Thankyou
The article is very well written with full clarity. Thanks Amrishji
In PUNISHMENT & PENALTIES, after clause (A), the words “and/or” (or, either of these two) appears to have been missed out. If these words have been really missed out in the proposed law, it has far more consequences.
Members of ICAI can very well live under NFRA regime. The central government should now promptly make consequent changes regarding independence of statutory auditors and giving more powers to auditors as now the auditors will be expected to work like blood hounds instead of watchdogs.
Contd.
Q
B) THE QUALIFICATIONS FOR APPOINTMENT OF THE CHAIRPERSON AND MEMBERS OF THE APPELLATE AUTHORITY, THE MANNER OF SELECTION, the terms and conditions of their service and the requirement of the supporting staff and procedure (including places of hearing the appeals, form and manner in which the appeals shall be filed) to be followed by the Appellate Authority SHALL BE SUCH AS MAY BE PRESCRIBED.
(G) The National Financial Reporting Authority shall prepare in such form and at such time for each financial year as may be prescribed its annual report giving a full account of its activities during the financial year and forward a copy thereof to the Central Government and the Central Government SHALL CAUSE THE ANNUAL REPORT AND THE AUDIT REPORT GIVEN BY THE COMPTROLLER AND AUDITOR-GENERAL OF INDIA TO BE LAID BEFORE EACH HOUSE OF PARLIAMENT.
UQ
The marked portions in the above selective excerpts are so vital, and vulnerable, – as of now details have been left to be decided /prescribed,- as the fulfillment of the basic objects / fundamental objective , so also the eventual outcome / success of the whole proposal , if and when given final shape, and set in place, hinges on !
MORE : Cross Refer Previous Posts
“LONG WAY TRAVELED ”
But many more milestones ahead, to reach and pass through !
What is wrong if the Central Government is taking against the culprits when they are not performing duties as expected of them?
Now the ICAI should not presume themselves as the God of Accounting Profession.
The CAs (acting as Consultant Brokers) mostly lack the industry/company in-depth knowledge. They do specialize in developing powerful relationship with Lenders’ Officials out of the bribes they organize from Borrowers. This breed of people who are substantial beneficiaries of frauds are not subject to ant Regulation and hence punishments for scams. . Is there any need for such creed to exist as most Borrowers do have capable and qualified employees at various levels who have moral responsibility, conscience and fear of punishment if scams break out? .
CAs are better forced to serve the country by doing what is best they are trained for – Accounting, Auditing; Taxation; Management functions, Specialised Consulting and not as arranger of funds by whatever name called? Will the Government/ICA look into this well known but ignored matter?
What is wrong if the Central Government is taking against the culprits when they are performing duties as expected of them?
Now the ICAI should not presume themselves as the God of Accounting Profession.
If the CA organisation is so powerful, how are scams occuring? Black sheep in the organisation is should be weeded out.
The Govt. is equally responsible for these scams. What is the CAG doing? It will publish its report much after the scam. How does this help? To sensationalise?
It is something like the Govt. Auditors for Housing societies. Once instance of proper auditing of housing societies will be difficult to find. My personal experience has been shocking.
But, of course, more laws make the situation more complex and it is easier to come out of any situation.
If ICAI regulated it’s members effectively , there was no need of NFRA but the fact is that it’s most of the CAs who promote all such activities like money laundering, entry business for a paltry fee and keep the businessmen in their cliches for reaping continuing benefits. If CAs work effectively black money will wither, but alas it’s not so.
PM had very effectively said so in their annual function.
A very good article Mr.Vashistha. It was long overdue after Satyam scam broke out & PwC got away with easy punishment. It is high time that the there must be overseeing body for such self regulating body like ICAI for their acts and omissions.
In the recent PNB scam, it seems the C.A or the firm of C.A doing the audit of the particular branch in Mumbai, did not seem to cross verify SWIFT transactions with the CBS and bringing the systemic failure to the top official of the bank or make a qualifying report in his audit report ?
That is the so called Professional conduct and competence if the a self regulating body.So sad.
WORLD OVER I THINK OUR CONSTITUTION & OUR LAWS HAVE SEEN MAXIMUM AMENDMENTS. IT SHOWS THAT MOST OF OUR LAWS HAVE BEEN IMPROPERLY DRAFTED BY OUR ELECTED POLITICIANS MOST OF WHOM ARE LAWYERS. CONCLUSION IS THAT THE education for & PASSING OF LAW EXAMS needs to be properly regulated.
It seems Central Govt.wants to enforce the fundamental regulatory principle that Makers and Checkers can not be the same ,in spite of the fact that at ICAI we have elected representatives who themselves proved by their independence as an elected representative , when there were occasions when they were required to enforce code of conduct in the disciplinary proceedings .
A. Did ICAI fail ?
Answer , unanimous Yes.
B. Why did we fail ?
Central Council Membership was used to provide leverage not at all available otherwise. Represention was in the hands of mighty.
A few served in exemplary manner but not majority .
C. About service to students
The mushrooming growth of private coaching is rude answer.
D. Centre of excellence role
I do not have much info. But it did not make impact for which it was founded.
E. Conferences & Seminars for knowledge management & enhancement
Members wait for announcement of programs by several other associations / societies. To name a few BCAS , CITC , KSCAA and many. Mainly chartered accountants are the faculty there to. Difference is delivery , quality standards , selection .
CPE pulled the crowd for ICAI programs.
I am also part of ICAI and pained for creation of NFRA as we lost our role for ever.
A welcome move by the GOVT . CA’s should not be law breakers using their intelligence and expertise.
This “stunner” might be the only good that is likely to result from this mistake , which has costed the nation 13k crores.
NFRA, long overdue. Step in the right direction.
This should give breather to the small practioners who compel to fall into the net and become prey to the greedy, unethical people and business entities who try to rob the country’s wealth. But with this constitution the members of ICAI should take very stern decision not to sign and report to the appropriate authorities within the scope set out by ICAI. By this set up ICAI’s image is not tarnished but is a warning message to the members who take a wrote g route or are compelled to do so whatever the reason might be.
Sirji You are master again . Hope something would come out at least if nothing. But ringing bell will be the case at all the times.