ICAI's President's Message for June 2020

My dear Professional Colleagues,

“Strength does not come from winning. Your struggles develop strengths. When you go through hardships and decide not to surrender, that is strength”.

Today, in the midst of seventy first year of standing, the respectable position Chartered Accountants carry is not by sheer chance but through a concerted process and efforts of setting high standards; may it be disclosure, assurance, ethics or skill development. ICAI has gained distinctive position amongst peer professions on account of committed virtues of independence, integrity and excellence. The fast paced professional environment continues to change and expect consistent re-skilling. “We have to strive harder to attain excellence in every sphere of our activities. Then only we shall be able to take advantage of the exciting possibilities and the opportunities which the future holds forth for our profession” said ICAI Past President, CA. A.C. Chakrabortti. The present challenging times should not be a deterrent and we as a profession need to come out stronger to be a role model in society. Both the Institute and the members need to realign themselves and innovate to face the emerging realities to maintain the competitive edge achieved by the profession over a period of more than seven decades.

Our position should not give a flavour of elitism, rather I believe the time has come to bring ICAI eco-system to next level of “WOW experience”. Progressive organisations world over believe their existence in providing wow experience to stakeholders. All of us will agree that in the recent past during COVID-19 Pandemic coupled with lockdown, two important initiatives; namely self-service portal and digital learning hub acted as vibrant vehicle for delivery of better and timely services to members and students. Through these services, we not only assured paper less communication for our members and students but also acted as catalyst for skill development. Today, more than 3 lakh members and equal number of students are enjoying the uninterrupted services and e-learning through these two initiatives which could be a case study for students of management. Still, as change is the only constant, we ought to deliver, institutional experiences, beyond expectations, to all stakeholders. We have no option to deliver beyond expectations, to all stakeholders. ICAI has initiated the next generation KPIs in its services to the Members and Students may it be on TAT or qualitative; taking delivery to WOW level. Reducing the time lag between examination and results by 15-20 days, 100% digitisation of answer books evaluation process, and reverification result within 7 days of application by students are among the few KPIs being recently developed.

Indian Economy and MSME - Role of SMP

According to World Economic Outlook, April, 2020 released by International Monetary Fund – “the COVID-19 pandemic is inflicting high and rising human costs worldwide, and the necessary protection measures are severely impacting economic activity. As a result of the pandemic, the global economy is projected to contract sharply by 3 percent in 2020, much worse than during the 2008-09 financial crisis. In a baseline scenario – which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound – the global economy is projected to grow by 5.8 percent in 2021 as economic activity normalizes, helped by policy support.” The global economic outlook for the current year is subdued on account of the pandemic that has led economies to face situation of deacceleration of growth or recession. The Indian economy that has been performing quite well with one of the highest growth rates in the recent past is no exception to the economic fallout of this medical catastrophe. Our government has taken a series of steps to sail through the difficult times providing financial and non-financial stimulus package for survival in immediate term and growth subsequently. The stimulus is in the form of direct cash benefits, moratorium on loan payments, relaxation on taxation front and so on. Efforts are being made to have Atmanirbhar Bharat (Self-Reliant India) with focus on five pillars – Economy, Infrastructure, System, Vibrant Demography and Demand. Packages are announced across sectors to drive India towards self-reliance comprehensively targets, cottage industry, MSMEs, labourers, middle class, industries, among others.

With the spread of Indian economy and employment generation capabilities, the Micro, Small and Medium Enterprises (MSMEs) are considered to be the backbone of the national economic structure. The sector is rightfully being seen as growth booster, providing resilience to ward off global economic adversities on account of Pandemic. MSMEs employ more than 11 crore people with GDP share of about 29 per cent and is a major constituent to achieve a target of having $ 5 trillion Indian Economy. The major measures announced for the sector include; Change in definition of MSMEs while removing distinction between Manufacturing and Services, Investment limits revised upwardly with new criterion of turnover added.

3 lakh crores collateral free automatic loans for businesses along with 20,000 crore subordinate debt and 50,000 crore equity infusion has been launched. For boost to make in India project, even global tender has been disallowed up to 200 crores.

ICAI with more than 3,10,000 members can facilitate the efforts of government in building new India. A substantial portion of Chartered Accountants are spread across the country and practising as Small and Medium Professionals (SMPs). The accounting profession has deep reach and connect to the MSMEs sector as SMPs are the trusted financial advisor of MSMEs providing variety of services including project financing, due diligence, working capital management, asset management, export promotions advices, budgetary forecasts, financial modelling, besides regular accounting, auditing and taxation activities. Our SMPs can play a key role by providing financial and strategic consultancy to MSMEs. They can help the MSMEs to overcome the financial challenges, augment resources and be judicious in expenditure by becoming mentors. Besides this, ICAI is also developing the MSME Continuity Checklist and other innovative suggestions for providing due impetus to this very important sector of the society.

Making New India – Atmanirbhar Bharat

Dear Colleagues, you may recall that in previous communication I have informed you that ICAI is working on Nine Mantras with an objective of boosting economic revival in the post Covid-19 scenario including Invest on Make in India. In this direction, we through our Strategy, Perspective Planning and Monitoring Committee organised a webcast on the theme “Making of New India” wherein key speakers namely Shri Nitin Gadkari, Hon’ble Minister for Micro, Small and Medium Enterprises, and Road Transport & Highways, Government of India addressed the Members on the challenges and issues in Covid-19 and post Covid-19 era.

The Hon’ble Minister provided inspiring inputs in the areas of Make in India highlighting the need to attract investments by good policy and increase productivity by innovation and technology. He suggested sectoral developments, improve sustainability and emphasized the need to have self-sufficiency, increase in exports and reduction in imports as a boost to Indian economy. Your ICAI being always stood with various initiatives of Government, this time working on the various innovative thoughts around Nine Mantras.

Shri Shripad Yeso Naik, Hon’ble Minister of State for AYUSH (Independent Charge) & Minister of State for Defence, Government of India also addressed the Members on the efforts taken by Government in combatting the Covid-19 pandemic and the important role played by the Members of the profession.

Draft Valuers Bill, 2020

Valuation as a profession is a nascent area that holds significant potential for Chartered Accountants. The Ministry of Corporate Affairs (MCA) had constituted a Committee of Experts to examine the need for an institutional framework to regulate the profession. On the basis of the Committee’s recommendation, a Draft Valuers Bill, 2020 was drafted proposing to establish a National Institute of Valuers and released for public comments. ICAI has also been a member of the committee and has participated in the detailed deliberations undertaken by the Committee. The Institute is the harbinger of establishing best financial reporting and auditing practices in India. Today our corporate world is stood at par with the any other global counterpart boosting investor’s confidence in Indian systems and processes. Considering the effective role played by the ICAI in establishing best accounting, auditioning, governance and ethical practices in India hitherto, we placed a suggestion before government to consider ICAI Valuation Standards 2018 to be recognised as the Indian Valuation Standards in line with Accounting and Auditing Standards.

Guidance on Accounting for Expenditure on Corporate Social Responsibility

Corporate Social Responsibility is a concept that aims to contribute to societal goals of a philanthropic, activist, or charitable nature by engaging in or supporting volunteering or ethically-oriented practices. While once it was possible to describe CSR as an internal organisational policy or a corporate ethic strategy, that time has passed as various international laws have been developed and various organisations have used their authority to push it beyond individual or even industrywide initiatives. While it has been considered a form of corporate self-regulation for some time, over the last decade or so it has moved considerably from voluntary decisions at the level of individual organisations, to mandatory schemes at regional, national and international levels. Understanding the way CSR can play a very important role in achieving Sustainable Development Goals (SDG 2030), the ICAI has brought out a research based Technical publication on Accounting for Expenditure on Corporate Social Responsibility Activities, to provide detailed guidance on the accounting aspects of CSR spends and its presentation in the Financial Statement. The publication will be useful for the accounting treatment of CSR expenditure and will also cover the position after the proposed amendments made to Section 135 by Companies (Amendment) Ordinance 2020, treatment for donations made in kind and treatment of excess expenditure than that specified under law. In view of the pandemic situation and recent spurt in the CSR expenditure by the Corporate world, this publication would be a handy tool for suitably recognising the CSR expenditure. At the same time, we have also issued an advisory to be used by Independent Practitioner’s while reporting on Utilisation of Funds for CSR Requirements. Both these publications are need of the hour and yet another contribution by the ICAI in line with its continuous endeavours to serve the societal needs.

Audit Considerations amid COVID-19

The present pandemic confronting the economies across the globe has consequential impact on preparation of financial statements and audits thereof. The economic impacts of the pandemic are far reaching and may go even beyond the current financial year. Under the given circumstances, the auditor has to consider planning and performing alternative audit procedures appropriate in the circumstances in order to obtain sufficient appropriate audit evidence to form an opinion on the financial statements. To facilitate this the ICAI has released a series of documents related to Audit Considerations amid COVID-19. These relate to Auditor’s Reporting, Going Concern, Physical Inventory Verification and Subsequent Events. It is needless to mention that Standards on Auditing (SAs) have to be complied with; and alternative audit procedures, wherever required, may be planned and performed to maintain the quality of audit.

A Boost to ICAI Disciplinary mechanism

ICAI has a robust disciplinary mechanism that derives strength from the provisions of the Chartered Accountants Act, 1949 and supports furtherance of excellence in the domain of Chartered Accountancy profession. Simultaneously, the Institute has remained at the technological forefront by using tools of Information Technology for process automation and knowledge dissemination. In line with the growing use of technology a need was felt for digitisation of disciplinary function as well. The digitisation of the entire disciplinary mechanism is a mammoth task in itself keeping in view of its voluminous and complex nature of work. After successful implementation of e-hearing during this Council Year, we have taken one more step in the direction of digitisation by developing a separate portal (https://disc.icai.org) specifically for disciplinary mechanism, wherein all pertinent information is readily available like the procedure to file complaint (physically or through e-filing), Cause List, Orders passed by the Disciplinary Committee, Committee compositions, details of meeting(s), amongst others for the benefit of various stakeholders. I am sure the portal would be a feather in disciplinary mechanism of ICAI and will take eco-system of governance to next level.

In continuation of regulatory mechanism which pave the way to act as a facilitator first then as a regulator in new economic environment, we have recently approved revised Statement of Peer Review to bring it more in line with the changing times catering to the overall objective of enhancing the quality of services rendered by our members and at the same time meeting the expectation of external stakeholders. Similarly, we are augmenting the processes and resources with our Financial Reporting Review Board with a view to enhance our capacity and to achieve a target to complete the review of financial statement of all listed companies beyond a threshold limit in a band of pre-targeted period. I sincerely hope with all these constant efforts we will further able to consolidate our position as robust regulatory body in India.

In the backdrop of rising awareness level about the precautions, improved healthcare facilities and concerns about the economy, it is satisfying to note that the government has announced relaxation in a phased manner, with regard to lockdown norms. With movement resumed by reinstating public transport, albeit in a restricted manner, economy will gradually start moving and we all are also back in offices although with much changed environment and circumstances. I am sure that you will use this little freedom responsibly and continue to abide by the guidelines imposed by the government as well as judiciously adhere to the precautions prescribed to prevent the spread of COVID-19. In fact the true test of our tenacity has begun now when we need to impose self-regulations amidst further moderation in norms.

Best wishes. Stay Safe and Healthy.

CA. Atul Kumar Gupta
President, ICAI