Strengthening National Accounting Firms Is The Need Of Hour. “We know this will be a challenge, but….”
15th August is approaching fast and feelings of patriotism shall be at its peak among us. Patriotism is the great and a selfless passion of love for one’s country. To an Indian patriot his mother and motherland are superior even to heaven. An Indian Patriot has been ever ready to lay down his life in the service of his country, India. Patriotism is not mere passive love for the country. A true patriot, who loves India, is an active worker. He works at heart and soul for the progress of his India and countrymen. (Quoted)
For Chartered accountants too, national patriotism shall be at its peak in the coming days. Can we add PROFERIOT in our self? What is this PROFERIOT? A proferiot should be the great and selfless passion of love for one’s professional institution. To an Indian Chartered Accountant his institution shall be superior even to heaven. An Indian Chartered Accountant should ever be ready for the sacrifices for his ALMA MATER i.e ICAI. A proferiot is not mere passive love for the ICAI. A true Proferiot , who loves ICAI, is an active worker. He works at heart and soul for the progress of the profession.
PATRIOTISM SACRIFICED BY INDIAN AVTAR OF BIG 4
Unfortunately, this patriotism of the Indian Chartered Accountant firms has been sacrificed before the Big 4 i.e Multi National Accounting Firms. How cool is the read National Accounting Firms? Where are these National Accounting Firms? Where do they stand in comparison to Multi National Accounting Firms? The top NAF has already sat on the lap of international affiliation of MAF. Is there any need of such illegal affiliations? The corporate houses are from India and they are well regulated by the Indian laws. There is no need of the NAF with MAF affiliations to audit the accounts of the Indian Corporate world .Then why the regulator, the government and the fraternity allowing their continuation on Indian soil.
Now the rest of National Accounting Firms (NAF) are in direct competition with the Indian Multi National Accounting Firms (MAF).These MAF are mighty. They are really huge. These MAF are well placed to achieve growth through all the possible channels. The Indian firms favor alliances with world’s biggest firms not for, the expertise of audit field, but to gain the monetary benefits from surrogate practices. They are huge international business organizations, the largest accounting firms in the world and some of the most influential professional persons on earth are managing these firms higher ups. They work through a complicated network of high level acquaintances and extraordinary interaction. Their influence is invasive moving to entities with confidence. They are into everything! They are born into the accounting world with the golden spoon.
LOOKING TOWARDS THE REGULATOR “ICAI”
As competition with the Big 4 firm intensifies, the category one firms “NAF” of the country looking for a helping hand with their open eyes towards the regulator ICAI to integrate their practice area beyond office boundaries. They are looking regulator’s timely helping hand and also look towards experts working in the same functional or industry specialties to take a dependable approach so that they can draw upon the accumulated wisdom & experience of the firm in that practice area. The Indian NAF is greatly facing competitions from large foreign multi-national firms having their head office in America and Europe. These large foreign multinational accounting firms have financial resources and have developed a very deep public relation network all across the world. The composition of the firms as at 2014 clearly shows a draw line between the NAF & MAF.
|S. No.||Composition||2014- No . of CA Firms|
|A||16 to 20 partners||57|
|B||10 to 15 Partners||316|
|C||6 to 9 Partners||1414|
|D||3 to 5 Partners||6941|
BIG 4 –TREAT THEM AS ENEMY NUMBER ONE
Treat them as enemy number one. Infect they all are Indian Firms and all of their partners are Indian so why we called them as International Firms. This is because of the simple reason that they are in illegal affiliation with the international brands or firms. Our regulator shall treat them as enemy Number ONE to deal with their illegal affiliations. The audit fees generate from the Indian corporate sector is being shared with international brands in one name or another. What a great surprise? The companies are Indians, The firms are Indian, The partners are Indian but a big share is being sent to abroad and that too from the non explanatory route. Can’t we block their routes? The money is also pouring through non explanatory route. One of a partnership, professional firm credited their accounts with the miscellaneous receipt from abroad to the tune of Rs. 4.00 Crore. Can a professional CA firm have any miscellaneous income, that too for crores of rupees? Auditing remains the foundation of the Big 4 practice. It is the centre of the action the land of big bucks. They called their higher fees, draw their greatest par and gain entry into the hearts and minds of corporate executives, political leaders and bureaucrats. Big business needs big audit firms with international exposure and the Big 4 are gigantic. Together they employ thousands of Chartered accountants. Now they are in the council and shall serve the next decade of profession through their leadership if nothing concrete emerges to counter their moves.
We should treat them as Enemy Number One. We should act against them. Merely issuing the reports on their conduct and operations on Indian soil is not sufficient now.
A. The balance sheet of the CA Firms having receipts of Rs. 10.00 Crore + should be called for analysis on yearly basis.
B. All the identical names of International firms / brands of accountancy firms be taken back.
C. All the similar names or identical names of CA firms giving an impression of one firm be taken back.
D. The regulator should take up the legal battle with them at Competition Commission of India for their dominance over the audit field?
E. All pending announcements to investigate their role in various scams across the country be taken up through a high ranked judicial commission.
NAF – TREAT THEM AS NUMBER ONE
Our National Accounting firms (NAF) have to take steps to grow by diversifying into new service areas such as management consultancy & other advisory services, M&A, capital markets etc, The NAF though led by energetic, effective and efficient Chartered Accountants facing a direct eyeball to eyeball from MAF and they have to vitalize and establish the supremacy of Indian Chartered Accountant Firms to lead the profession of chartered accountancy not only in India but also internationally. Brand-building and brand recognition are the two key factors which can help a firm increase in size. It is important for the regulator to provide appropriate branding support to NAF to equip them in emerging areas having in depth training mechanism.
A. To Promote 500 NAF to have their PAN India presence and aspire them to work towards global presence.
B. It is also very important to publicize Brand India among NAF, with a sole mission that they can play an important role in advising, guiding and counseling the decision makers that NAF are the best.
C. Its cost effective .It may cost only 1/4th but will provide value of at least 4 times, as compared to any of our competitors internationally.
D. To enhance the quality by quality reviews to ensure adherence to standards.
E. To facilitate NAF for hiring competent executives, admitting partners with additional quality of and providing value-added services to clients.
F. To dismantle the almost dead old Net working and merger regulations and should be replaced by the associate auditor or joint auditors thoughts.
G. To enable publicity, advertisement and continuing persuasion in the minds of banks, merchant banks, authorities and various large investors and entrepreneurs that NAF are not only more trustworthy, competent and efficient but also more committed to endow with professional services in the most preferred manner.
H. The regulators have to communicate to all that Indian Chartered Accountant Firms are ready to provide a wide spectrum of services to investors from their country and are not only capable but also are fully reliable.
GOVERNMENT ROLE TO PROMOTE NAF
The Ministry of Corporate Affairs’ Government of India, Secretary Mr. D.K. Mittal at one stage have agreed in the council on suggestion that in case he receive a proposal, the Government is ready to consider providing necessary financial grant to select Indian Chartered Accountant Firms to set up offices in various parts of the world and to become truly multinational Indian Chartered Accountant Firms. It wass suggested by him that a concept note on this may be prepared and sent to the Ministry for approval. Thereupon the ministry shall invite Expression of Interest from Indian Chartered Accountant Firms once the concept is approved in principle. The firms shall be selected transparently by an independent panel and subject to such conditions and requirements as may be determined in terms of the concept paper.
AUDIT FIRM GOVERNANCE CODE-BE FORMULATED
The accountancy firms are of great importance to the economy. They are the integral part of the economy ready to face their role of protector and motivator. They are having major impact on the broader health of the financial system. This is the time to move for adopting Audit Firm Governance Board. Adoption of the Audit Firm Governance Code should not be seen as regulatory requirement, but the firms to which it applies should use it as a catalyst for improved governance of the profession. The code shall enforce the same playing field and principle of external challenge for the international network organizations as well as at national level. The Code itself should more sharply define the public interest, particularly by explicitly recognizing the importance of audit quality. It should continue to be sufficiently flexible to allow firms to apply it in ways which best suit their governance structure.”
NAF PROMOTION IS IN NATIONAL INTEREST
It is in the National Interest. It is in the Profession Interest. The task is hard. We can think it as castle in the air but I would like to use a simple word substitute to counter MAF moves and actions with the support of the regulator and Government. Challenges for NAF are quite different from here as competition is with the mighty. The NAF are committed to transparency, true and fair disclosure, better tax compliance and most importantly they are committed to ensure maximization of shareholders wealth and investors protection.
I have heard business managers call such a situation a challenge. When everyone in the room knows that the financial goal the managers just set forth is going to take a Herculean effort to achieve, they often follow up by saying something like, “We know this will be a challenge, but….”
CA AMRESH VASHISHT, Meerut