An unpleasant truth is better than a comforting lie…

The noble profession of Chartered Accountancy is one of the few professions which witnesses’ equal participation from women and men sees no discrimination on basis of religion, caste or colour but there is a different kind of discrimination which most people don’t see till the point they start to feel it.

Discrimination against small/medium-sized firms

It is no secret that small and medium-sized CA firms have been neglected by the ICAI since years. There is no motivation for a young CA today to start his/her own practice. A profession which was once chosen by many to become the master of their fate and captain of their souls no longer serves this purpose. The only option is to join the big players and work for them. It’s either ‘their way or highway.’ Our profession has one of the best brains present out there. Our women and men deserve the respect and independence which they worked hard to achieve.  We are the ones who chose to walk the path less traveled. We worked hard when others were making memories with friends/families because we believed in our profession. The profession of Chartered Accountants needs the progressive dimension of running a successful Audit firm. Another truth is that in today’s national scene, it is time that with the visualization & aspiration, every individual or sole proprietor should create new avenues and be ready to successfully administer his or her practice.

Reasons to believe Firms discrimination

There are established reasons to believe that the regulators’ mechanism of categorization of firms is not working well. The overall categorization is of four types. Category 1st, 2nd & 3rd belong to firms having partners. However, category 4th is a category for sole proprietors. The sufferings are for the category 3rd & 4th. The professional opportunities are less and there is stiff competition among such firms as 70% of the total firms fall under these categories. There is a need to increase the scope of work for practicing chartered accountants, especially the new entrants to the profession to get the minimum assignment as a motivation to continue the practice. Some of the vital bottlenecks for small categories can be summarized as follows

i) NIL opportunity where work is allotted through tenders.

ii) No statutory Bank Audit for the first three years of the practice.

iii) The earlier condition of at least allotment of 40% work of statutory Bank Audit in the case of sole proprietors dispensed with.

iv) No PSU minor audits for the first five years of the practice. Thereafter the net profit of the specified sum is required to be maintained otherwise ineligible.

v) No concurrent audit to sole proprietors. Only Partnership firms are allowed that too for four concurrent per partner per year.

vi) Sole Proprietors firms are not considered for statutory audit of RRBs

vii) Sole Proprietors firms may not consider for statutory audit of the cooperative banks.

ICAI-Election Manifesto

Measures to overcome from the challenges being faced

One does not need to be a rocket scientist to tell that small/medium sized CA firms are the backbone of a developing economy and soul of our profession. Without them, small businesses cannot flourish or remain organized. The souls of our profession are those chartered accountants around the country working day in and out. Unfortunately, their contribution is yet to be recognized. Any person who has ‘CA’ in front of his/her name has worked equally hard to get it and deserves equal opportunities to work.  We together make the profession great and cannot allow a small number of players to control it.

Tendering of CA services

Tendering abuse shall be dealt with strongly. In case of tender acceptance by any authority, a cost sheet by a CA should be approved by ICAI before taking up the audits. If ICAI rejects the cost sheet, the members shall not be eligible for initiating any work awarded through such tender. ICAI approval over cost sheet shall be dealt with the same spirit as Communication with the previous auditor. Tendering offers must be free from emphasis to the size or the turnover or net-worth of the Chartered Accountant Firms and no such minimum criteria need to be specified in their minimum eligibility requirements to serve them. The regulator should formulate the guidelines to regulate the tendering process under Clause (6) of Part I of the first schedule.

Statutory Bank Branch Audits

A Statutory bank branch audit should be made compulsory for all bank branches, irrespective of the number of advances and/or deposits of the branch. The first three-year eligibility criteria should be dispensed. Equal playing field shall be provided to all the eligible with the weight age system of the year of experience. The individual and sole proprietors should have at least 70 % of the total statutory bank audits. The categorization system is illogical to be scrapped. As the Govt. is retaining a cut-off limit of advances of Rs.20 crores, the branches falling below this limit should be audited once in 3 years instead of the present system of 5 years, which is an extra-long period and gives impetus to wrongdoings at such branches. The basic structure for allotment of the bank branch statutory audit should be revised & should be based on the advance plus deposits exposure of branch instead of advances only. The auditors are responsible for the authenticity of deposits also.

Statutory PSU Audits

Sole Proprietors Chartered Accountant firms in India with at least one full-time FCA can apply for empanelment with this office for allotment of audit of Public Sector Undertakings. For the first five years, sole proprietors are not eligible for such an audit. The selection of CA firms for appointment as statutory auditors of PSUs whose audit fees are up to Rs 1.50 lakh is made by correlating the point score earned by each firm of Chartered Accountants towards empanelment with the size of the audit fee. The point score is based upon the experience of the firm, the number of partners and their association with the firm, the number of Chartered Accountant employees. So even after five years, there is very remote possibility to get an audit from C& AG.

Sole Proprietors are also subject to achieve a designated profit from their proprietary firm. Even after achieving 5 years, he is not getting the net profit of Rs. 3,60,000/- in metro and Rs. 1,80,000/- for non-metro. He or she shall not be eligible for the C& AG audit. This is in addition to weight age granted for every partner so, in no circumstances, a sole proprietor can’t beat the smallest partnership firm. What a mockery? Above all, it is quite disgusting that the same is having an approval of the regulator. This 5 year blocked don’t have any merit to stand. It’s a hindrance to the growth of a sole proprietor firm. There should be an independent scale of measurement of sole proprietor’s weight age as logically sole proprietor firm cannot beat a partnership firm.

Concurrent Audits

RBI issued the guidelines for the concurrent audit portfolio. The Guiding Principles on Concurrent Audit issued by the RBI in September 2012 clearly defined that Chartered Accountant Firms should be appointed from the RBI panel as per the gradation based on the size of the Branch. Here too sole proprietors have been kept out of reach for such audits. Few banks are still carrying the sole proprietors, but it seems now it’s a matter of a few days. The regulator must have been in support of sole proprietors as they need a helping hand from the proprietor. This limit should be scrapped and branches with some specified advance/ deposit limit are reserved 100% for the local sole proprietors.

RRB Audit

Standalone RRBs Statutory Auditors may be drawn from Category II & III and In the case of non-availability of Category I, II & III, auditors may be taken from Category IV and Sole Proprietors firms may not be considered for statutory audit of RRBs. It is totally surprising that the vital changes were made against the sole proprietor firms which are all most 70 % of the total firms. The size of the RRB and the remuneration of the RRB are totally fit to reserve this audit opportunity in favour of sole proprietors or uppermost mid-size firms. Category-IV auditors and Sole Proprietorship Firms even with the experience of more than 20-25 years are not considered for the appointment as branch auditors of small branches of the RRBs.

Cooperative Statutory & Concurrent Audits

Sole proprietor firms are out of eligibility norms and as per agreed policy. This policy embarks that as far as possible CA firms falling in Category I & II are to be chosen. However, firms of III categories with good experience may also be chosen. Since the Concurrent audit of the cooperative Banks, the option to consider whether the concurrent audit should be done by the external auditors (professionally qualified Chartered Accountants) or its own staff is left to the individual banks.

Tax Audit

The present limit of the Tax Audit u/s 44AB is 60 per partner. This limit is prescribed by the regulator. This tax audit limit does not cover the tax Audits u/s 44AD. This omitting of limit u/s 44AD is again in favour of partnership firms. The limit criteria are based on four fundamental wrongs, but being dragged by the regulator since long. The first wrong is not recognizing the audits u/s 44AD through the audit report is same, working is same, and the risk of an accountant is also same then why there is a difference between 44 AB & 44AD. The second wrong is the limit of 60 audits a year. The limit should have both the audits and be increased to make it growth oriented for the sole proprietors. The third wrong is illogical authorization to signatory on behalf of the firm. TAX Audit has to be signed by an accountant as defined in section 288 of the income tax act. Section 288 does not recognize the existence of firms, but the regulator has allowed the signing of Tax Audit reports beyond prescribed limits to be signed for and on behalf of the partners of the firm.

Trust / Society Audit U/S 10 BB

Presently Tax Audit is not applicable to Cooperative societies, Trust/societies (Non-Business entities), the same be put to some limit based on their revenue receipts. This will be a new professional opportunity and work shall increase manifold without much effort. The reports should also be limited and regulated through the maximum number of audits on the line of Tax Audit.

The government, authorities and other stakeholders are required to be effectively communicated that they need not give overemphasis on the size of the turnover or net-worth of the Chartered Accountant Firms, and no such minimum criteria need to be specified in their minimum eligibility requirements to serve them. The Government, RBI and other regulators may issue guidelines on regulators persuasion that sole proprietors / Midsized CA Firms are only considered for Government sponsored jobs and assignments for any organization receiving Government Grant.

Author Bio

Qualification: CA in Practice
Company: N/A
Location: Meerut, Uttar Pradesh, India
Member Since: 17 Jun 2018 | Total Posts: 127
Author was Member of ICAI- Capacity Building Committee 2010-11 and ICAI- Committee for Direct Taxes 2011-12 and can be reached at email [email protected] or on phone Phone: 0 1 2 1-2 6 6 1 9 4 6. Cell: 9 8 3 7 5 1 5 4 3 2 having office at 1 1 5, Chappel Street, Meerut Cantt, UP, INDIA) View Full Profile

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  1. vijay mohata says:

    This is really a bitter truth.. A chartered Accountant gives almost 5-7 years to become a CA. Thereafter, if a person wanted to opt for practise; he is no more in the race-in getting work. The young;nurtured brain wanted to do work from his heart but unfortunately this discrimination puts him outside the race. Even concurrent audits- the least preferred audits are not in his hands. I urge ICAI to look into this and do something for practise aspirants newly qualified Chartered Accountants- Future of Great nation- helps in nation building…

  2. CA Narendra Soni says:

    I agree with the views expressed in the article. Is there any rationale to allot the PSU audit work only to big partnership firms which have five partners and there is continuous partnership of five partners at-least ? While the allotted work later on, they are giving on sub contract basis or work carried out by the freshers ?

  3. Pani says:

    Why is the Competition Act silent about dominance position of the Big4 and fleecing the clients with high fees and to the detrimental to the interests of smaller firms, do every bit of non-audit services such as book keeping, payroll processing and small little works. It is a fit case for booking and levying penalties. Regulators are unable to control and bring any kind of discipline. The smaller firms are bearing the brunt of such existence and practices.

  4. Naresh Khanna says:

    Best brains in the country are being wasted. ICAI Elections are round the corner and concern for voters is cropping up ! Not a single person has spoken to me among st those who will fight the elections ! Small CA firms are also finding it difficult to get articles and suitably train the future generation . ICAI article ship portal , which is free, is absolute waste of money and time.

  5. CA MIHIR says:

    We are living in a ere whether survival depends on merger, acquisition and consolidation. Our PM NOMO rightly said that why Indian chartered account can not form BIG FIVE like BIG 4 zinternational Friends we need to form a big firm with more partners for our own survivals,, if want to stay in this Nobel profession.

  6. CA. C V SURYAM says:

    When I represented GST Council through ICAI (as per the instructions of ICAI) regarding the introduction of payment of GST upon realization as it was in service tax atleast which will ease the smaller CA firms to withstand the GST timely compliance pressure. But the reply I got from ICAI was that such type of mechanism creates confusion and rejected to focus before the GST Council. I could not understand how it creates confusion when it was not so under service tax.

  7. Kanhaiya says:

    Sir, I truly second your views. I would further like to add that in the recent years there has been high dearth of articles availability for small firms. Most of such articles are consumed by larger firms and many are opting for dummy articleship, leaving very few and thus many small firms are bound to take services of B.Com students which effects quality of work as B.Com students are not that much inclined towards audit and standards. This issues also needs to be addressed.

  8. CA Anurag Goel says:

    I would like to add more in above,

    I all tenders, Concurrent Audit, Forensic Audit & other Panels, the previous experience is a mandatory requirement.

    I am having more than 20 years of professional experience and managing three partner’s firm in which Two are FCA, still a leading PSB refused to empanel us for concurrent audits because our firm was not having minimum Four Year Concurrent Audit Experience!!!!!

    Will anybody let us know how we will have experience until we will be empanelled and allotted work???

    You have written it right – “The only option is to join the big players and work for them. It’s either ‘their way or highway.’”

    It will be highly damaging position in future…
    Similar was with Forensic Auditor Panel, If a partner or more than one partner qualifies for Forensic Audits, than from where they will get the experience???

    If every organisation will empanel only those firms or CA’s who must have been allotted previous work in their names than how new entrants in the field will get the assignments!!!!

  9. A Practicing Chartered Accountant says:

    Sir, why such articles come only during ICAI Election times & after Elections there is no action or even talk on it ?

  10. TIRU C NARAYAN says:

    Eye-opening article about discrimination against single-proprietor CA. And it discusses only about Audit. What about tax-consultancy for individuals? It would be interesting to know about that practice. Sure, it will not have the glitz, glamor, or money-making, capability, but that is a service to the common person.

  11. CA GALA ASHWIN says:


    Your concern for small CA practitioners is very much correct. But incresing the No. of Audit limit will work adversely.
    If no. of audit limit is increased it can not be increased only for proprietor. If no. of audit limit is increased , it will be for all And the benefit will be taken by bigger firms. They will obtain more audits leaving lesser audits for Small Proprietor firms.
    In fact if a proprietor has got 60 audits there should be no question of complain by the proprietor. He/she should be able to get good fees with quality work. But the problem is he/she is not getting good fees as compared to the efforts put in.
    Provisions need to be done such that good fees is received as compared to efforts put in.

  12. M V KAMESWARA RAO says:

    Our (Your) past council members and Presidents in the last 15 years have success fully spoilt CA profession. I 100% agree with your views. Thank God, after being a member of ICAI for 31+ years, my decision of not continuing as CA is not wrong.


    Juniors & sole proprietorship firm should be encouraged instead of employment.
    Foe eg: I have not been allotted bank branch audit for the last 4 years,
    Further number of tax audit to worth mentioning is not much compared with my 32 years full time practice

  14. Pinky says:

    Yes. I agree with you sir since I am facing these issues. Practicing CA profession has been my dream from the day one of my CA career. Presently facing all these difficulties to build my firm. Not sure how long will be able to survive.

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October 2021