Dear friends,
Coming together is a beginning. Keeping together is progress. Working together is success, so said American industrialist Henry Ford, and this holds good for our profession as well. Together, each one of us can make a big difference. Think, if each drop of water were to say that one drop does not make an ocean, there would be no sea. Yes, you and I do make a big difference, more so when it comes to financial discipline of our economy. Let’s come closer to make a bigger difference, particularly in the backdrop of current global economic scenario and Union Budget 2012-13. I am happy to note that this year’s budget is quite progressive and pragmatic, and, together with greater stability and supportive government policies, it will spur investment-led, sustainable and more inclusive growth. We have also played a role in shaping this Budget through Pre-Budget Memorandum submitted by us to the Government. Now, general debate about the Budget is almost over. And thus, it is time for us to sit up and take stock of the consequent new changes and challenges pertaining to our area of activity in detail, and move on with professional panache for which we are known for. Let us update ourselves with the latest and continue with our professional journey confidently, ethically and altruistically.
Chartered accountants symbolise fiscal prudence and discipline, and with their multi-dimensional capabilities, they can act as catalyst for economic development. As envisaged and attempted by Union Finance Minister Shri Pranab Mukherjee, we can take up a proactive role not only to get the nation back to its pre-crisis growth trajectory but even surpass it to reach double-digit figures. In our various capacities as ‘total business solution provider’ including as advisors, consultants and auditors, we can be crucial in achieving the broader Budget objective of inclusive growth combined with stronger and more effective public institutions, delivery mechanisms, governance and reforms. Resultant forthcoming changes will pose new challenges to us testing our skills, confidence and caliber. Let’s prepare ourselves for that. We are indeed good at our work, but when Better is possible, Good is not enough. Here, let’s recall the words of wisdom of our economist Prime Minister Dr. Manmohan Singh during our Diamond Jubilee celebrations in 2008 who expressed : Your institute has served our country with great distinction. I sincerely believe that we cannot be satisfied with the status quo and I sincerely hope that the best is yet to come and that the next 60 years will be still more productive, innovative in the service of the people of our great country...It would be most appropriate for Indian Chartered Accountants to reaffirm their commitment to the cause of excellence, independence, ethical conduct and highest standards of professional integrity.
Now, let me update you on some of the major developments and initiatives pertaining to our profession in particular and nation in general over the last month:
An Update on Branch Audit of Public Sector Banks for the Year 2011-12
As you all are aware that based on the recommendation of a Working Group set up by RBI, it was proposed to carry out changes in allotment of bank branch audits of the public sector banks by raising the minimum threshold (advances) limit of branches which will not be subject to audit by statutory auditors. It was mainly proposed that all branches having outstanding advances of Rs.20 crore and above as on March 31, 2012, need to be audited for the year 2011-12. And of the remaining (branches having outstanding less than Rs.20 crore), one fifth branches were proposed to be selected at random in such a way that all the remaining branches are audited at least once in five years. The proposals were based on the perception that there was no need of extensive branch audit in view of implementation of CBS in all public sector banks. In this regard, I am extremely happy to inform you that following our hectic and sustained drive of representations to authorities concerned and meetings with all top quarters of Indian polity and policy makers, we have been finally able to make them see merit in our stand and viewpoint on the move to reduce extensive audits of branches of Public Sector Bank. As such, the Ministry of Finance has now decided that all branches having outstanding advances of Rs.6 crore and above as on March 31, 2012, need to be audited for the year 2011-12. And of the remaining (branches having outstanding less than Rs.6 crore), one-third branches are to be selected at random in such a way that all the remaining branches are audited at least once in three years.
On behalf of the profession, I humbly thank the Government for arriving at this farsighted decision, which will ultimately strengthen the cause of corporate governance and public interest in the banking industry. I am also grateful for the understanding and support of all those whom we approached at various levels of Indian polity, particularly our Rajya Sabha Deputy Chairman CA. K. Rahman Khan, Union Finance Minister Shri Pranab Mukherjee, Union Corporate Affairs Dr. M. Veerappa Moily, Chairman of Parliamentary Standing Committee on Finance Shri Yashwant Sinha, Member of Parliament CA. Piyush Goyal, Secretary, Department of Financial Services, Shri D. K. Mittal and Reserve Bank of India Executive Director Shri Vijaya Bhaskar.
The earlier move was not at all in the long-term interest of the banks and the nation. In case, the said proposal would have been approved, the public sector banks would have got exposed to a higher risk by not covering majority number of branches and advances, thereby leaving scope for undetected material misstatements, including frauds, whereas the saving in cost would have been negligible in the hands of the banks. Further, ICAI as a regulator of the auditing profession, firmly believes that such proposal if implemented would have undermined the fair reporting on the state of affairs in public sector banks.
This favourable decision of the Ministry of Finance is an opportunity for us to prove our worth once again and show the value addition we make through the branch audit to the financial statement of Banks. Let me also inform you that we are also pursuing both the Government and the RBI to see the merit in allowing CAs to carry out branch audits of private sector banks as well. A more detailed update on this whole issue of branch audit has been published immediately after my message.
Triumph of Democracy
Yet another national event that gave me great satisfaction was the festival of our democracy, right from its commencement to its culmination, with high turnout and serpentine queues in Uttar Pradesh, Uttarakhand, Goa, Punjab and Manipur elections. Irrespective of who won, the ultimate winner has been our thriving democracy. In the end, it has been the triumph of the people of India, the aam aadmi who first and foremost voted for democracy.
Our International Initiatives
Visit to New York: As part of our sustained efforts to strengthen brand Indian CA globally, I, along with the ICAI Vice President CA. Subodh Kumar Agrawal, recently visited the New York (US) Chapter of ICAI and interacted with its office bearers. During the visit, we also had a meeting with Ms. Arleen Thomas, Senior Vice President, AICPA, to explore the possibility of developing minimum common exchange programme and organising joint seminars on international taxation and other emerging issues. We also had meeting with Mr. Russell Guthrie, Executive Director, IFAC, to explore the possibility of organising exchange programmes between ICAI and IFAC.
Visit to Mexico: I, along with Vice President CA. Subodh Kumar Agrawal, recently attended the International Accounting Education Standards Board (IAESB) meeting in Mexico. The participants in the meeting discussed the revision of International Education Standards 2, 3, 4, 6 & 8. The strategy and work programme of IAESB were also discussed. The meeting focused on establishing a series of high quality standards and other publications reflecting good practice in the education, development, and assessment of professional accountants.
Visit to Dubai: Recently, I and ICAI Vice President CA. Subodh Kumar Agrawal also visited ICAI Knowledge Village, Dubai, to review the various activities of Dubai Chapter of ICAI. We also interacted with the IPCC students there with regard to the IT training and other classes.
MOSAIC Inaugural Steering Committee Meeting in Jaipur: I am glad to inform you that we recently organised the MOSAIC (Memorandum of Understanding to Strengthen Accountancy and Improve Collaboration) inaugural Steering Committee Meeting in Jaipur, which witnessed a distinguished gathering of more than 35 delegates from organisations across the world. Mr. Anthony Martin Hegarty, Chief Financial Management Officer-World Bank, Mr. Dannies Chisenda and Mr. Kennedy Musonda, Ministry of Finance, Zambia, and Mr. Deborah J. Williams, Chair-IFAC PAO Development Committee, were some of the dignitaries present on the occasion. I, on behalf of ICAI, highlighted the significance of such an MoU between the IFAC and the international donor community that provides foundations for increasing the capacity of professional accountancy organisations and improve the quality of financial management systems in emerging economies. We have proposed to the IFAC, Chair PAODC and the august audience that we could host the permanent secretariat for the MOSAIC MoU Steering Committee. The meeting included a comprehensive discussion on the goals and objectives of the MOSAIC MoU cooperation and establishment of MOSAIC Steering Committee and MOSAIC secretariat for the purpose of monitoring and evaluation of the donor community.
SAFA Meetings in Delhi: ICAI Vice President CA. Subodh Kumar Agrawal recently attended the 20th meeting of SAFA Board held in New Delhi. The meeting was attended by representatives of accountancy bodies from SAARC countries namely India, Pakistan, Bangladesh, Sri Lanka, Nepal and Maldives. Extensive discussions were held for the development of accounting profession in the region. A new taskforce to address the risk and challenges to the accountancy profession in SAARC region in the context of various developments taking place has also been constituted.
India-Netherlands Joint Working Group Meeting in Delhi: I am happy to inform our stakeholders that we recently participated in the meeting of the India- Netherlands Joint Working Group on Corporate Governance and Corporate Social Responsibility in New Delhi.
Our Initiatives for Members
Meeting with Shri Yashwant Sinha: I would like to share that I, along with the ICAI Vice-President CA. Subodh Kumar Agrawal, recently met the Chairman of Parliamentary Standing Committee on Finance Shri Yashwant Sinha, in connection with our concerns regarding the Companies Bill, 2011 and submitted a memorandum.
Initiative for Service Tax Practice: The major shift in taxing services based on the “negative list” would lead to at least 25 per cent more assessees being covered under the levy of service tax in the coming year. The simplification of the returns would lead to the onus of the compliance being shifted to the tax payer. This would require that professionals are equipped to advise and assist the service providers as well as the service receivers [under reverse charge] to register, pay and file returns. The challenges for a person liable to pay the tax would be to examine the applicability of the threshold limit, coverage under exclusion/inclusion, coverage under exemption, availing of appropriate credit, choosing of abatement [partial exemption of value], resolution of disputes, recommending of disclosures as the onus of compliance would be with the person liable to pay and general compliance with the rules. This would also require the members of the profession to update themselves on the changes and their effect on the clients.
To this objective, we have planned to have a special a two-day course on “Enabling Service Tax Practice” for Chartered Accountants in practice at all branches for those who wish to start in this value additive area of practice. For those who have already started in any of the areas of indirect tax, mainly in VAT or service tax, a Certificate Course [6 weekend - 12 days] is planned in different Tier 1 and Tier 2 cities in all regions. Further, a post-budget memorandum would be placed before CBEC incorporating the clarifications/amendments needed on scores of issues.
New Group Formed: In response to a communication from the MCA regarding the European Union’s request and our reiteration on the possible roadmap for liberalisation in the accountancy sector, we have decided to send an interim reply to the Ministry. Keeping in view the sensitivity of the matter, we have decided to constitute a ‘Group to establish ICAI’s view on the EU Request List and possible liberalisation roadmap’ under the convenorship of our Central Council colleague CA. Manoj Fadnis to complete the task by 31st March, 2012, and establish our view on the EU Request List and the possible liberalisation roadmap. Please be assured that we are not going to compromise on the interests of Indian accountancy profession.
Residential Programme on Masters in Business Finance: I am happy to share the information that we launched the second batch (2011-12) of the one-week residential programme of Certificate Course on Masters in Business Finance and successfully concluded the same at the Centre of Excellence in Hyderabad in two groups in February–March 2012.
Capacity Building: Due to changes in the economic environment which has thrown open more challenges and opportunities for professionals, it is imperative to build capacities of small and medium firms in order to enable them to face and take advantage of this competitive environment. Towards this end, we will soon organise a series of workshops and conferences to educate the members, create awareness among them and address the apprehensions in their mind regarding capacity-building measures like LLPs, networking, mergers and management consultancy services in corporate form. We will also identify the disadvantages and challenges being faced by members while resorting to such consolidation processes and take remedial measures. Also, many initiatives will be taken to explore other areas of capacity building like venture capital and tie-ups with banks for availability of funds at cheaper rates.
ICAI-MCA Investor Awareness Programmes: It is heartening to share with our stakeholders that we have conducted altogether 78 MCA-ICAI investor awareness programmes within a short span of two weeks in February 2012 through resource persons encompa-ssing almost all states of our nation.
Campus Placement Programme: I am happy to inform you that we are presently conducting a campus placement programme for newly-qualified chartered accountants for a period of February-March 2012 at 17 centres across the nation. Details of this programme are available at www.cmii.icai.org. We are getting very encouraging response from a good number of organisations. Further, we have recently organised Orientation Programme for Newly Qualified Chartered Accountants at 11 cities across the nation while similar programmes were held in March 2012.
WIRC Members’ Meet & Orientation Programme: Recently, I had the opportunity to attend, along with the ICAI Vice-President CA. Subodh Kumar Agrawal, the Orientation Programme of WIIRC members, successfully organised by the WIRC of ICAI. All 27 branches of WIRC participated in the programme. Representatives of the branches made some valuable comments and suggestions. I sincerely hope to include these in our work plan for the profession. A Members’ Meet was also organised by the WIRC which was attended by its members in large. We did our best to address their queries and concerns as far as possible. We also used that occasion to interact with all the new office bearers of the WIRC.
Bhoomi Pujan at Surat Branch of ICAI: Keeping up with the agenda of strengthening the infrastructure of accountancy profession, I recently attended the bhoomi pujan ceremony at the Surat Branch of ICAI and laid the foundation stone of its building. The occasion was marked by the presence of our Central Council Members CA. Mahesh Sarda, CA. Dhinal Shah, CA. Rajkumar S. Adukia, CA. Sanjeev Maheshwai, WIRC Chairman CA. Durgesh Kabra, the then Branch Chairman CA. H. Tosniwal and the members and office bearers of the Branch.
Educational Materials on Ind AS 1, 2 & 37: Let me inform all our stakeholders that we have recently issued the educational material on Ind AS 1, ‘Presentation of Financial Statements’, Ind AS 2, ‘Inventories’ and Ind AS 37, ‘Provisions, Contingent Liabilities and Contingent Assets’. So far about our 3,950 members have been successfully trained in the 100-hour intensive training programme of the IFRS Certificate Course held across the nation. Currently IFRS Certificate Course batches are being conducted at Bangaluru and Dubai.
Boosting the CA Benevolent Fund: “Charity begins at home but should not end there,” is the saying which is worth taking note of by us today- particularly when we have scores of families of deceased professional brethren and those suffering from terminal/serious ailments in our fraternity who are in dire need of financial assistance. It is our duty to support and stand by them in times of distress. And the Chartered Accountant Benevolent Fund offers an excellent opportunity to do so in an organised and systematic manner. The CABF is an initiative by the CAs for the CAs, which has aided 971 needy families in the last five years (2007-08 to 2011-12). However, presently the corpus of the fund is not enough to cater to the needs of all the families in distress. Therefore, it becomes an urgent requirement to boost and bolster this fund, which is not possible without your generosity and support. I call upon all of you to join this benevolent initiative and make CABF an integral part of your socio-professional duty. More than 1,07,540 members have already joined as life members of CABF, but what is needed is that all of us not only become life members but also contribute more than the minimum stipulated amount and continue to contribute in future as well. Life subscription of the fund is for Rs.2,500 and ordinary subscription is for Rs.500 per annum payable in favour of ‘Chartered Accountant Benevolent Fund’. Remember that charity, howsoever trifle to us, can be utterly precious to our brethren in need. Let’s make CABF a thriving movement for CAs’ welfare, nationally as well as internationally. Remember that a candle loses nothing by lighting another candle.
Partner in Nation Building
Revival of Group for In-house Development of Taxonomies: I have revived the Group for In-House Development of Taxonomies under the convenorship of our Council colleague CA. Atul C. Bheda. The Group will develop a draft taxonomy for the Commercial and Industrial Companies (C&I) as per the revised Schedule VI to the Companies Act, 1956 and relevant law besides developing a taxonomy guide explaining the taxonomy for the convenience of the users. The taxonomy, in addition to presentation/calculation/label link bases, shall also comprise the definition, reference and formula link bases. The Group will also document the taxonomy and provide a taxonomy viewer so that the same can be viewed in tree hierarchy format.
Removing Hardships with Regard to TDS Return: We have been making suitable representations to the CBDT and other appropriate bodies on various issues. Recently, it has been brought to our notice that demand notices are being served on the deductors on account of various possible reasons. The said matter was placed by us before the Central Direct Taxes Advisory Committee in its meeting, which was chaired by the Union Finance Minister Shri Pranab Mukherjee. Considering the fact that there may be other difficulties which are being faced owing to rectification of TDS returns, we have been requested to compile all such difficulties being faced by the assessees and discuss the same with appropriate authorities. We also raised the issues like our submissions on Tax Accounting Standards, guidelines for empanelment of auditors for special audit under section 142(2A), etc., at the meeting, which was also attended by Shri S. S. Palanimanickam, Minister of State, Ministry of Finance, Shri Laxman Das, CBDT Chairman, other senior officials of CBDT, and nonofficial members from FICCI, ASSOCHAM, Federation of Association of Small Industries of India. Our Central Council colleague CA. Sanjay Kumar Agarwal was nominated from ICAI for the meeting.
Training Programme for ITAT Officers: We are organising a training programme for ITAT officers in Bhopal. I am sure that this initiative will help in bettering the governance in general and sharpening the skills of ITAT officers in particular. More such programmes are in the offing.
Accounting Standards in Government Educational Institutions: The working group comprising the members of ICAI and the Ministry of HRD on Implementation of Accounting Standards in Educational Institutions of Department of Higher Education has recommended that all educational institutions, which generally follow diverse accounting practices and different basis of accounting, should be mandated to apply accrual basis of accounting and Accounting Standards issued by the ICAI. We have also recommended fund-based accounting for earmarked/designated funds. We have stressed that all educational institutions should follow a common format for presentation of its general purpose financial statements to ensure proper accountability, financial discipline, end-use of funds and to meet the needs of stakeholders. We have also proposed that the Ministry of Human Resource Development, in coordination with ICAI, organises capacity building programme to train the staff of educational institutions.
Reserve Bank of India Meeting on CDR: A meeting of Working Group to Review the Existing Prudential Guidelines on Restructuring of Advances by Banks/ Financial Institutions was recently held in Mumbai. In the meeting, comprehensive discussions were held in the area of corporate debt restructuring (CDR), bringing clarity to the existing guidelines on restructuring of advances and sharing of experiences regarding cases of restructuring undertaken and success ratio thereof. In the meeting, the ICAI Vice President CA. Subodh Kumar Agrawal presented the views of ICAI.
Union Budget Interactive Session: The ICAI Vice- President CA. Subodh Kumar Agrawal was invited as Chief Guest in ‘Union Budget Interactive Session’ organised by the Swadeshi Research Institute, Kolkata.
Chairman of Parliamentary Standing Committee on Finance Shri Yashwant Sinha was the main speaker in the programme. Key aspects of the Budget 2012- 13 were discussed threadbare in the programme. On the occasion, the Vice President also raised the views of ICAI on the proposal of RBI for raising the minimum threshold (advances) limit of the branches which will not be subject to statutory audit, issues in the new Company Bill and on the definition of the word ‘Accountant’ in the Report of Standing Committee on Finance on Direct Taxes Code Bill, 2010 (DTC).
Initiatives for Students
Preparing Students for CA Examination: As you are aware, we had embarked on organising mock tests for the students through the Regional Councils and Branches since last year. Continuing the practice, the tests papers for the mock tests for the May 2012 Examination have been sent to all Regional Councils and Branches asking them to organise the tests twice i.e. in March and April. A rigorous follow-up is also being done to ensure that maximum number of students can benefit from this initiative. Further, we have revised our booklet titled How to face CA Examination and hosted it on our website.
Four-Week Residential Programme: As part of our focused efforts to make our students become a cut above the rest, we are organising a four-week residential programme on professional skills development focusing particularly on communication and leadership skills, and personal traits for effective functioning in business organisation at our Centre of Excellence in Hyderabad. Two batches of 40 participants each will be trained in April, and then, in May-June 2012. With such programmes, I look forward to taking the professional skills of our students to the next level, in sync with the present and the future.
Drawing Students to Accounting Stream: As part of our efforts to attract brightest of students to accounting stream, we have decided to participate in education fairs at various cities, including Education Boutique 2012 in Ahmedabad, Bengaluru, Chennai, Chandigarh, Hyderabad, Thane and Patna. We will also participate in educational exhibitions called Horizon organised in eight citities of Kerala where ICAI has its branches.
Review of CA Syllabus: As informed to you in my last message, CA students are very high on my priority list. As also included in my action plan for this year, I have resolved to align Indian accountancy education with the emerging imperatives in line with global best practices. An all-encompassing and experience-rich education for students is one of my main goals. In this regard, I am happy to inform you that we are having a comprehensive review of our syllabus for CA course.
Joint Seminars on FDI and IFRSs: It is satisfying to note that we are constantly organising seminars and workshops jointly with various universities in our nation on contemporary issues of accountancy and commerce. Recently, one such seminar was held jointly with the Bharati Vidyapeeth Deemed University, Pune, on Foreign Direct Investment in Retail Sector, which was attended by faculty engaged in teaching of accountancy and finance, research scholars, and postgraduate students of accountancy and commerce. Another such seminar was organised jointly with the Shivaji University, Kolhapur, on International Financial Reporting Standards.
Code of Conduct for CA Students Soon: It is my earnest endeavour to inculcate an added sense of discipline and responsibility in respect of academic matters, personal conduct and ethical value-based learning habits among our students, which is very essential for impeccable future of our profession. As such, we are in advance stages of finalising a Code of Conduct for CA students during the period of practical training and, also while pursuing PCC/IPCC, prior to registration for practical training. The Code will also apply to the students who have completed practical training but not yet passed Final examinations. I am sure this move will go a long way in shaping the future of our students and the profession.
I am sure these developments and initiatives will go a long way in boosting our profession.
Before I conclude, let us remind ourselves that knowing is not enough; we must simplify the knowledge and apply it to the fullest satisfaction of our clients and other stakeholders. Knowledge is a process of piling up facts; wisdom lies in their simplification with creativity. Technical skill is the mastery of complexity, while creativity is the mastery of simplicity.
Let’s always keep in mind that with the hard work, dedication and intricate knowledge we can reach pinnacle of your chosen area of professional activity. Remember: man at the top is usually someone who has been in the habit of going to the bottom of things. Knowing ‘how to…’ is important to execute a job but knowing ‘why’ and ‘what’s to be done’ is all the more important, for this is the trait of a visionary. If you do little things well, you’ll do big ones better. “We are what we repeatedly do. Excellence, then, is not an act, but a habit,” rightly says the ancient Greek philosopher Aristotle, and this saying aptly fits our profession. It is widely believed that a honey bee visits two million flowers to collect 500 mg of honey. So, our workload is nothing as compared to them. Let’s draw inspiration from words of wisdom by American businessman Donald Mcintosh Kendall: The only place where success comes before work is in the dictionary. Therefore, keep working. I extend all of you my best wishes for an allround success.
CA. Jaydeep Narendra Shah
President, ICAI
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