CA Amresh Vashisht
Over the years, the society at large has placed a high level of trust, confidence and reliance on the auditing profession, with the very few exceptions, in our country the profession of chartered accountancy has shown objectivity and integrity towards its role into the economy. The relevance of the future itself to the accounting professionals transcends its relevance to coming up standards because these standards are setting the future of this profession. We believe that much that will happen in the years ahead is already viewable and understandable.
Fewer opportunities for the profession will definitely going to pose challenges to both individual Chartered Accountants and to their regulator, the Institute of Chartered Accountants Of India. There is a phenomenal growth of Chartered Accountants in the last one decade and a new trend is shaping up that a considerable number of members have been taken up employment in preference to practice on account of opportunities and the best payout in the industry.
We can say that our membership base is shifting to industry and it’s a positive sign because it is directly related to the feature that there is acceptance of the chartered accountant in different fields of trade and industry. It is credibility to the worth of education undertaken by the newcomer chartered accountant and that’s why he is acceptable to the proposition of different industries. Certainly those chartered accountants who are coming out with flying colors from ICAI have a head start as they have been trained in core domain of accounting and auditing which is far above in comparison to other professionals.
INDUSTRY VS PRACTICE
However, movement of fresh CA towards industry will not affect the profession in practice in long run, though many feel that it would affect the profession. The young members generally say that the movement of newly qualified members towards industry will affect the profession in long run, but majority of the senior members opined that it would make no big difference. Industry Vs self practice is an old debatable issue and every side is having its own merits and demerits without any reconciliation between the two. . The following data demonstrates the shift in strength from holding a certificate of practice to employment. The data clearly demonstrate that this profession is served by the young as about 50% of the present strength has entered the profession in the last one decade.
| Year | COP | % | No COP | % | Total |
| 2000 | 65,843 | 71% | 27,137 | 29% | 92,980 |
| 2005 | 78,158 | 63% | 45,388 | 37% | 123,546 |
| 2011 | 84,618 | 50% | 85,992 | 50% | 170,610 |
| 2012 | 91,487 | 48% | 101,026 | 52% | 192,513 |
| 2013 | 1,03,636 | 48% | 1,13,483 | 52% | 2,17,119 |
| 2014 | 1,12,324 | 1,17,355 | 2,29,679 |
PARTNERSHIP & SOLE PROPRIETORS
The big Indian accountancy firms have affiliated themselves to grow big and enjoy global exposure. Multinationals are establishing subsidiaries of large size in India. Many prominent accountancy firms have already tied up with the International brands and are working as affiliate to them. The professional firms are conscious of this inevitable change of the profession and are gearing up for restructuring. For that very purpose they have to expand their firm size. The presence of BIG 4 in India is subject to scrutiny. As per the regulator ICAI, the arrangement is unlawful and the firms are operating illegally. The firms have failed to share with the regulator about their arrangements with their principals abroad and also there are unanswerable receipts and payments from and to foreign sources.
A CA practicing solely or in a smaller group may be hindered from professional development or his development may be slow owing to his limited work exposure. In small-sized firms, CA’s exposure is usually limited to the traditional areas such as accounting, auditing and taxation. Moreover, the clientele of sole proprietorships and small firms grows at a slow pace and may remain same over many years, restricting the opportunity of working with new clients and on new assignments. In contrast, CAs who are part of larger firms get exposure to a diverse range of functions such as M&As, IPOs, transaction and business advisory services, or financial consultancy, etc. which contributes considerably to their professional development in the long run. Further, firms in non-metro cities offer relatively less professional exposure than the firms in metro cities where business opportunities are large-scale.
| YEAR | Proprietary | 2 partners | 3-5 partner | 6 – 10 partner | 11 – 20 partner | Total |
| 2000 | 30517 | 7036 | 3189 | 703 | 48 | 41493 |
| 2001 | 31144 | 7161 | 3275 | 707 | 52 | 42339 |
| 2002 | 31788 | 7299 | 3317 | 810 | 54 | 43268 |
| 2003 | 33561 | 7464 | 3629 | 881 | 72 | 45607 |
| 2004 | 33957 | 7728 | 4036 | 961 | 92 | 46774 |
| 2005 | 32697 | 8032 | 4526 | 1009 | 108 | 46372 |
| 2006 | 31950 | 8028 | 4607 | 989 | 129 | 45703 |
| 2007 | 32165 | 7843 | 4525 | 941 | 130 | 45604 |
| 2008 | 32001 | 7705 | 4440 | 919 | 145 | 45210 |
| 2013 | 38132 | 8316 | 6129 | 1272 | 333 | 54,182 |
THE CHANGE OF CA FIRMS TREND IN LAST DECADE
The figures related to the firms of our profession are alarming and clearly shows the unbalanced playing field. Most of the firms are small and medium practitioners (SMPs). The number of firms is being increased manifold. The work in the hands of the firms is squeezing day by day. Now sole proprietors are being shunted out in phased manner. There is no logic to give preference to partnerships because ultimately it has to be signed by one Chartered Accountant and the responsibility was also limited to the signatory. Now NAFRA shall take care of this gap and shall extend their arm against the firm. This change is neither normal nor growth oriented. This change is coming up due to various conditions advanced in many quarters related to strength of the firms and this number game is the only reason that members are joining their hands. It is directly related to professional opportunities. Auditing has never been an easy profession, particularly in small firms, and this is especially so today. We are witnessing thrust on partnership because our regulator has failed to impress upon the audit entities the concept of associate auditor or joint auditor.
| Composition | No. of Firms | ||||
| 2003 | % | 2013 | %
|
% Growth
In last decade |
|
| Proprietary | 33,561 | 73.58 | 38,132 | 70.38 | 14% |
| 2 Partners | 7,464 | 16.36 | 8,316 | 15.06 | 11% |
| 3 to 5 partners | 3,629 | 7.99 | 6,129 | 11.31 | 69% |
| 6 to 9 partners | 824 | 1.80 | 1,272 | 2.64 | 54% |
| 10 to 15 partners | 104 | .22 | 277 | .51 | 166% |
| 16 to 20 partners | 25 | .05 | 56 | .10 | 124% |
| Total | 45,607 | 100% | 54,182 | 100% | 19% |
Network amongst two or more firms is an arrangement to facilitate the better functioning of the affiliate member firms in the interest of the profession & not for acquisition of any gain. Such Network shall include the formal network to use the collective resources such as turnover, infrastructure, human resources and location for execution of professional services of one or more type. Having been successfully adopted by many firms in the developed nations, ‘networking’ is another option for growth of small and medium sized firms in India in the current scenario but many riders have been placed on the terms and conditions which makes the whole exercise of Net Working Scheme is dead scheme . Being member of the Capacity building committee for small and medium firms, many serious attempts were made to give some oxygen to this dead scheme but all gone in vain.
MEF FACTOR RELATED TO FIRM: A CASE STUDY OF 2010
As on 31st March 2010, The ICAI data depicts that out of there were 73462 full time practicing members spread over to 50000 odd firms as at 31st march 2010. Out of 50000 firms only 29000 firms have applied under MEF. This is to be mention that exact reconciliations are not possible at a certain date because both the base dates are different The left out firms are having a big share of firms running in initial three year. This is to assume that only 58% % of the firms are inclined towards the Bank Audits. The revenue income of these practicing firms are dominated from the bank Audits fees. In the year 2010, the total number of 28829 firms applied through MEF.
| CATEGORY | NO. OF MEF APPLICATIONS |
| I | 1237 |
| II | 2165 |
| III | 3908 |
| IV | 11016 |
| IV SP | 5866 |
| Sub total | 24192 |
| PART2 (Ineligible) | 1172 |
| PART3 (Ineligible) | 3045 |
| Total | 28829 |
It is unknown to many that the Banks are having region base bank audit allotment procedure. The Banks with the approval of RBI has created five regions for the audit and auditors availability. The strength of the auditors is being segregated to these regions and then the allotment procedure stars. This segregation is also not giving expected results but the same is still in use.
| REGION | Category I | Category II | Category III | Category IV | TOTAL |
| North | 354 | 495 | 735 | 2387 | 3971 |
| South | 260 | 439 | 948 | 4277 | 5924 |
| East | 189 | 271 | 445 | 2532 | 3437 |
| West | 184 | 398 | 699 | 3946 | 5227 |
| Central | 250 | 562 | 1081 | 3740 | 5633 |
| Total | 1237 | 2165 | 3908 | 16882 | 24192 |
Though all the states of the country have been placed under the respective regions their boundaries have no impact on this region theory. The following chart clearly shows that the states where top categories are in less numbers they are directly benefitted by C& AG and other Government assignments.
| STATE | CAT I | CAT II | CAT III | CAT IV | TOTAL |
| Assam | 3 | 15 | 22 | 329 | 369 |
| Meghalaya | 0 | 0 | 0 | 11 | 11 |
| BIHAR | 11 | 31 | 56 | 142 | 240 |
| Jharkhand | 13 | 29 | 55 | 148 | 245 |
| Arunanchal | 2 | 2 | |||
| West Bengal | 153 | 217 | 358 | 1893 | 2621 |
| Nagaland | 6 | 6 | |||
| Manipur | 2 | 2 | |||
| Orissa | 33 | 39 | 65 | 280 | 417 |
| Sikkim | 5 | 5 | |||
| Tripura | 4 | 4 | |||
| And & Nik | 1 | 1 | |||
| U P | 108 | 234 | 432 | 1421 | 2195 |
| Utrakhand | 4 | 17 | 26 | 140 | 187 |
| Delhi | 250 | 269 | 314 | 872 | 1705 |
| Punjab | 27 | 85 | 165 | 826 | 1103 |
| Haryana | 18 | 91 | 179 | 452 | 740 |
| Chandigarh | 31 | 24 | 40 | 100 | 195 |
| J & K | 21 | 9 | 17 | 76 | 123 |
| Himachal | 7 | 17 | 20 | 61 | 105 |
| Rajasthan | 69 | 124 | 271 | 940 | 1404 |
| Gujrat | 36 | 123 | 216 | 1419 | 1794 |
| Maharashtra | 148 | 271 | 472 | 2433 | 3324 |
| Goa | 3 | 11 | 94 | 108 | |
| MP | 35 | 86 | 185 | 704 | 1010 |
| Chatishgarh | 10 | 41 | 56 | 245 | 352 |
| Andra Prades | 67 | 121 | 264 | 1112 | 1564 |
| Karnataka | 38 | 79 | 179 | 1223 | 1519 |
| TamilNadu | 122 | 175 | 377 | 1345 | 2019 |
| Kerala | 33 | 61 | 121 | 580 | 795 |
| Pondichiary | 3 | 7 | 17 | 27 | |
| TOTAL | 1237 | 2165 | 3908 | 16882 | 24192 |
Now the profession has spread over to hundred of the cities but the professional firms are concentrated on the metro cities of the country. Out of the total strength of firms approx 42.66 % of the firms belong to only 13 cities of the country. Again a considerable point is that more than 63% of the firms at the 13 cities belong to small category firm. So the partnership pattern and priority being given to partnership is a kind of reservation of work for the few. It is certain that some key drivers are being ignored which are vital for the growth of Accountancy profession.
| Metro Cities | Category I | Category II | Category III | Category IV | Total |
| Delhi | 250 | 269 | 314 | 871 | 1704 |
| Mumbai | 90 | 139 | 237 | 753 | 1219 |
| Chennai | 98 | 106 | 204 | 558 | 966 |
| Kolkatta | 149 | 200 | 320 | 1584 | 2253 |
| Bangalore | 33 | 61 | 123 | 691 | 908 |
| Hyderabad | 43 | 68 | 147 | 480 | 738 |
| Pune | 17 | 40 | 74 | 324 | 455 |
| Patna | 11 | 24 | 35 | 74 | 144 |
| Chandigarh | 31 | 24 | 40 | 100 | 195 |
| Jaipur | 53 | 59 | 117 | 201 | 430 |
| Ahmadabad | 21 | 63 | 109 | 529 | 722 |
| Lucknow | 24 | 35 | 46 | 132 | 237 |
| Kanpur | 26 | 42 | 86 | 197 | 351 |
| 846 | 1130 | 1852 | 6494 | 10322 |
What has been discussed above is a case of the entry level CA professional and the mid career movement if someone opts for transition from practice to industry and vice versa. Similarly enhancement of the strength of the partnership firms also require in depth consideration of the various modalities. From the institutional perspective, ICAI sees no rights or wrongs in either practice versus employment or sole proprietorship verses partnerships. The ICAI has formulated these frames keeping in view of the requirements of different segments of society and the effort are on to continue this process of building a well grounded professional.
Read Other Articles of CA Amresh Vashisht
Author Bio
Sir,
Nice Article!I have similar feelings as Akhsay.
CAI makes us expert in is giving advisory services to businessman
advising them how to run and control there business in the best
possible manner but fails to a great extent in supporting our
members(especially young ones) in the marketplace by strict adherence
to the minimum fees benchmark.
1.Tax audit : I do not understand why it is even called audit. An
audit as per me calls for an independent examination of anything may
be financials, process, internal controls etc and the delivery in
the form of report of the findings to the appointing authority. In
this case the appointing authority is the business entity and the ones
to whom we are reporting is the Income Tax department. The
independence is badly affected because how a Chartered Accountant can
do audit in true sense when he is more concerned that the tax audit
opportunity remains with him at any fees level. Moreover if someone,
say someone denies the so called tax audit opportunity ,then there is
always someone to do it even at a lower fees.
Further, if it is to remain as it is why should any Chartered
Accountant be answerable to the society or the Institute on what he
certifies when the Institute or the society cannot give him the
required independence to do his work.(Constant CAG reports on the
utility of tax audit reports by chartered accountants)
Are we not making a mockery of the profession ?
I request any Council Member to please tell me how does the tax
audit serves any purpose until and unless there is in place the
following mechanism:
1.There is a web portal run by ICAI independently or jointly with
Income Tax Department whereby anyone who are falling within the tax
audit bracket upload their requirement of needing a tax auditor by
April end. (Is there anything in law which specifically prevents
this,If not why cannot ICAI do it.)
2.We can categorise the auditee firms on the basis of turnover,
professional receipts as well as categorise auditor firm depending on
their experience, partners, location etc as already done in bank
audit.
3.Then the tax audit can be allocated on the portal on matching basis.
4.The fees can be deposited at the portal or directly paid to the auditors.
Advantages :
For the Society and Income Tax Department:
1.Independence can lead to quality tax audit reports and reduce tax leakage.
2.This single activity can control money laundering in a big manner
because now the auditor is free to report his findings as an auditor
and need not advise the auditee as a consultant on tax planning which
in itself needs to be a different exercise but which I believe gets
clubbed in our current role and I believe is not even appreciated.
For the professional Accountant :
1.Surety of work and pay with freedom.
2.Respect for profession will increase in auditee community as they
will be aware that we can write our findings without any fear of any
kind leading to better professional satisfaction.
Control:
ICAI as a facilitator and regulator of the accounting profession in
India will need to keep a constant check on its members through peer
review and also create a helpline for the auditees whereby they can
report any malpractices.
Sir,
Nice Article!I have similar feelings as Akhsay
ICAI makes us expert in is giving advisory services to businessman
advising them how to run and control there business in the best
possible manner but fails to a great extent in supporting our
members(especially young ones) in the marketplace by strict adherence
to the minimum fees benchmark.
1.Tax audit : I do not understand why it is even called audit. An
audit as per me calls for an independent examination of anything may
be financials, process, internal controls etc and the delivery in
the form of report of the findings to the appointing authority. In
this case the appointing authority is the business entity and the ones
to whom we are reporting is the Income Tax department. The
independence is badly affected because how a Chartered Accountant can
do audit in true sense when he is more concerned that the tax audit
opportunity remains with him at any fees level. Moreover if someone,
say someone denies the so called tax audit opportunity ,then there is
always someone to do it even at a lower fees.
Further, if it is to remain as it is why should any Chartered
Accountant be answerable to the society or the Institute on what he
certifies when the Institute or the society cannot give him the
required independence to do his work.(Constant CAG reports on the
utility of tax audit reports by chartered accountants)
Are we not making a mockery of the profession ?
I request any Council Member to please tell me how does the tax
audit serves any purpose until and unless there is in place the
following mechanism:
1.There is a web portal run by ICAI independently or jointly with
Income Tax Department whereby anyone who are falling within the tax
audit bracket upload their requirement of needing a tax auditor by
April end. (Is there anything in law which specifically prevents
this,If not why cannot ICAI do it.)
2.We can categorise the auditee firms on the basis of turnover,
professional receipts as well as categorise auditor firm depending on
their experience, partners, location etc as already done in bank
audit.
3.Then the tax audit can be allocated on the portal on matching basis.
4.The fees can be deposited at the portal or directly paid to the auditors.
Advantages :
For the Society and Income Tax Department:
1.Independence can lead to quality tax audit reports and reduce tax leakage.
2.This single activity can control money laundering in a big manner
because now the auditor is free to report his findings as an auditor
and need not advise the auditee as a consultant on tax planning which
in itself needs to be a different exercise but which I believe gets
clubbed in our current role and I believe is not even appreciated.
For the professional Accountant :
1.Surety of work and pay with freedom.
2.Respect for profession will increase in auditee community as they
will be aware that we can write our findings without any fear of any
kind leading to better professional satisfaction.
Control:
ICAI as a facilitator and regulator of the accounting profession in
India will need to keep a constant check on its members through peer
review and also create a helpline for the auditees whereby they can
report any malpractices.
Very good Akshay
Very good article. However, union of two or more CAs by forming a firm is need of the day. The expectations of clients are increasing day by day and an individual can’t fulfil all of them. The time has come that ICAI should organise CA professionals for future growth and should reduce focus just on CPE events. In reality, CPE events are not helping members either in practice or service at large.
warm wishes sir,
thanks for information provided. let me share my ideas. Our profession is invaluable because it has its own value from the word chartered Accountant. we are living in india. For every citizen there is duty to be discharged. Particularly businessman. we could remember here, i.e social cost and social benefit. Basically our colleagues and our students are brought up with required knowledge which will enhance our life and society. Always we are asset to the country in all aspect. But why duty of businessman is not discharged? If i can lift 20 kg, i can lift. where else i have been given 60 kg how i can? I point put audit of a firm. Similarly every members in practice should get better opportunity for their well being and society enhancement. Please continue your article, so that we can realise let everyone live and have peace. Let our colleagues and member join hands and be together for well being and society enlightenment.
Worthy statistics sir!!!
Good compilation
It is a very inspiring article for both CA students as well as existing CA’s. Thanks a lot sir for this useful information. It will really help us to decide between ca practice and employment.
Very Interesting analysis sir..
regards
CA Jitesh Agarwal
9099957625
very useful analysis
thanks a lot sir
A very good analysis, which trows light on the trend.
the proprietory firm and the small partnership will be immensely benefited if company audit whether small or big company will be allotted by ROC as in the case of bank audit. even in the case of audit of non-corporate cases, better if CBDT allotted audit
Amresh sirji, just love reading your articles. Excellent analysis.
Dear sir,
Very valuable information to profession.
THANKINGYOU
Good write up.
Dear Sir
Thanks for this important information.
Regards
Praveen Kumar
Yes, it is true that in present senario big size partnerships are required to provide a specialise services to indusrty. Proprietory or small partnership firms (less than 5 partners) has limitations in providing versetile expert services.
Sir,
First of all let me thank you for this vital information analysis. But I have some questions running in my mind:-
1. Today after clearing the CA there are two options : Employment & Practice. Our principles have shared their experience in this regard and the major conclusion is that Practice has an advantage over employment in the long run. Also, much much emphasis is given on the fact that in the initial years of practice we have to struggle. Say for example for initial 5 years we will have to struggle to establish the practice!! Is this 5 years not long enough? First we spend 4 – 5 years on an average to become CA and then again 5 years to establish the practice. In total 10 years are invested just to build the career!! While planning it is very important to discuss the pros & cons. So what if after investing 10 years, one is not able to establish a reputed practice?
2. Today it is not any secret that obtaining professional work is more like having a LINK with someone. Worse, now bank audits will also be allotted through links since the system of RBI allotting the bank audits has gone? So what is available for new entrants in CA Practice? Please don’t mind my words if I say that “new comers have been left at the mercy of their seniors”. Also, we should not forget that securing work through links will have an impact on the independence on the auditor!! The basic objective of auditing is defeated??
3. Since ICAI is a regulator of this profession why not it takes a leading charge to maintain the dignity and integrity of this once reputed profession? For example, system of allotting audits (both in private & public sector) shall be put in place through out INDIA and ICAI shall monitor the system in the following way:-
a. A database shall be developed categorizing the firms on the basis of their capacity & strength. Like the number of FCA partners, ACA partners, paid CA’s, articles, staffs, location of office, number of branches etc.
b. Every organization liable for audit shall place an inquiry on the website of ICAI for appointment of auditor. The inquiry form shall contain certain questions through which it can be determined which level of firm can conduct the audit.
c. On receiving the inquiry, ICAI shall appoint the auditor and communicate the organization and the appointed auditor regarding the appointment along with the fees. Both the parties may be allowed reasonable time to respond to the appointment.
d. This system is already in place for allotment of concurrent audits of banks and should be widened to include all types of audits in which CA’s are involved.
e. Recently a CAG report highlighted that certain CA are accepting more audits than permissible by the ICAI. By having this kind of system, no one can accept more than specified number of audits. And this will also provide a level playing field to all the CA’s.
Please note that this is just a suggestion. There can be any other system But the emphasis should be on maintaining and re-developing the lost dignity of this profession by upholding the independence & integrity of the auditor.
Sir, A very good work worth appreciated. At least as a member of the fraternity I could understand the spread of the members and really a good work.
Good Morning Sir,
Very good article written. One can have brief insight about the profession, whether be it in practice or in full time employment. One can decide how to move after passing CA exam. Really a wonderful article…..