Hi refer to the following news in the Business Line yesterday which tells that hiving off the educational part of our CA course to a separate body will  improve the quality of audit

Professional-cum-educational body

Hiving off the educational part of the ICAI into a separate body is unlikely to lead to qualitative improvement in auditing, as the malaise lies elsewhere.

S. Murlidharan

The Ministry of Corporate Affairs (MCA) is actively mulling a proposal to split the Institute of Chartered Accountants of India (ICAI) into two so that there are two bodies each catering to two distinct constituencies — aspiring professionals and full-fledged professionals.

The stimulus for this brainwave has predictably come from the UK where such a split is reported to have been successful.

If the success talked about is in being able to administer the two areas of activity better like with smaller States, then one can understand if not agree.

Gains from split?

But what the MCA hopes to reap in the aftermath of such a split is a qualitative improvement in auditing. One is at a loss to understand how. Ever since the Satyam scandal rocked the nation, the profession of auditing has been in the doghouse more than ever before.

The fraud of such a scale — involving around Rs 8,000 crore — perpetrated over a leisurely span of time obviously could not have taken place without the auditors being complicit.

True. But that does not mean the Aegean stables of auditing can be cleansed with a stroke of a butcher's cleaver, hiving the educational part of the ICAI into a separate body. This is because the malaise lies elsewhere.

Be it surrogate auditing by the Indian auditors on behalf of the multinational firms of auditors or the hand washing spirit in which auditing is done generally with laconic disclaimers, the dual role of the ICAI is not in the least responsible for any of these shortcomings.

To cavil at such a dual role is to extol the virtues of core competence — concentrate on one area. The truth however is the ICAI has never felt handicapped or burdened by the dual role it has been playing all along.

Just as a conglomerate can be managed efficiently by distinct heads of the various profit centres, students' and members' affairs too can be managed efficiently under one roof but with separate infrastructure in place.

In the event, it is wrong to attribute the decline in the quality of audit to lack of proper oversight by the ICAI. A large State is indeed difficult and unwieldy to administer and hence its division into two may tone up the administration but the same cannot be said of a professional body which needs to groom its future entrants with care and for which spatial spread is not the problem.

Credibility crisis

The lackadaisical attitude generally attributed to the auditing profession, which impression it is finding difficult to shake off, stems from the system of appointment of auditors, as is widely known.

Indeed, the profession of auditing is suffering from credibility crisis not only in India but almost throughout the world. An auditor who owes his office to the management of a company simply cannot be counted upon to be independent.

It is common knowledge that the quality of audit of public sector companies in India by the same auditors who also do private sector audits is far superior. Which shows that there is nothing intrinsically wrong with their education or training.

It is the system of appointment. In the public sector, it is the CAG which appoints and rotates the auditors quinquennially.

There is a move afoot to rotate the audit partner to start with before a system of rotation of the firm itself is ushered in. These will not do. What is required is a roots and branches reform in the system of appointment of auditors — emulate the public sector wholeheartedly and not on a piecemeal basis.

Academic rigour

It is widely acknowledged that there is a great deal more of academic rigour in the curriculum of the CA examinations than in most of the institutes and universities imparting management education culminating in the fashionable MBA degree for their students.

The A-grade institutes such as IIM Ahmedabad, IIM Kolkata etc, to be sure, must be and indeed are conscious of the need to maintain academic rigour but the same cannot be said of others just as the law education imparted by the National School of Law is heads and shoulders above the law education imparted by many lesser me-too universities.

Ditto for technical and engineering education — witness the lament of CII and other chambers that majority of the engineering graduates coming out of the portals of the me-toos often wearing the prefix ‘deemed' are not employable.

Experience shows that a monolithic set-up is more conducive to maintaining uniform and higher standards of academic rigour.

It is not as if the MCA is seeking to disturb the monolithic character of the CA education but the existing model has more to commend itself because there is a Siamese twin relationship between a profession and its aspirants.

The Administrative Reforms Commission of the yore had wondered why the three accounting bodies — ICAI, ICWAI and ICSI — alone are monolithic whereas it is not so with other disciplines and professions.

The question obviously is rhetorical with answer being clear — it is the monolithic character of these professional-cum-educational bodies that has kept their educational quality high and demanding.

To be sure, the distance education character of these three bodies too has facilitated this because engineering, medical and law education are full-time warranting a different kind of decentralised infrastructure.

Dilution in the curriculum or a less demanding curriculum is anathema to a profession and professional body. Tomorrows professionals are shaped today and they should be moulded keeping in mind the felt demands of the events to come which can be anticipated only by the professional body that has its ears to the ground and the facility to change the curriculum with alacrity.

(The author is a Delhi-based chartered accountant.)

The url for the above is      http://www.thehindubusinessline.com/2010/01/28/stories/2010012850820900.htm