With an institute that has grown to be the second largest in the world, the time has come when Indian Chartered Accountants (CA) can dominate the world stage like accounting professionals from no other country.
At an individual level the Indian CA has taken the world by storm. Indian CA professionals are as proficient in understanding and implementing International Accounting Standards (witness the outsourcing of accounting to India) as the best in the world.
For the world to witness and experience our potential as CAs, we need to speak the global language of common standards, common practices, common attitude and outlook. That said, it is in areas where regulatory enablement is required that we are woefully falling behind, preventing us from achieving our standing in the global accounting arena.
‘Made in India’ rules and guidelines are rising the walls of “country specificity” isolating the Indian profession, at a time when the profession should be out there conquering the world.
Regulators of the profession seem to think that all national and international laws and regulations must necessarily be amended to be made India-centric. As a result these laws end up shackling the profession in its bid to internationalise itself. Witness the recent proposed amendments to the CA Regulations.
In a welcome move the Government of India had in 2006 amended the CA Act to allow CAs to form multidisciplinary partnerships with non CAs. This has for long been a global norm, but was prohibited in India. The Institute of Chartered Accountants (ICAI) was given the power to propose the categories of individuals a CA may partner with. While the ICAI has taken the correct step of proposing partnering with lawyers, architects, actuaries, engineers, cost accountants and company secretaries; it has undone the drive for internationalising the profession by specifying that such engineers, architects, actuaries, lawyers e.t.c., must only be members of the relevant Indian professional body established under the respective governing Acts in India.
As a result, for example an Indian CA who wants to render cross border multidisciplinary services and bid for international contracts, would be ineligible under these regulations if he wants to tie up with professionals from those countries. However, most International Agency funded global contracts (like those funded by the Asian Development Bank, World Bank etc) stipulate partnering with a minimum number of domestic consultants.
Regulating quality of services delivered by Auditors is a matter of universal concern. The International Federation of Accountants (of which ICAI is a member) has issued for international usage a ‘Statement of Quality Control’ 1 (ISQC) laying down expectations from Regulators in this matter. The ICAI has modified this statement and issued an “Indian Version” for usage by Indian CAs. It is interesting to note the areas of modification.
The ISQC recognises that a variety of experts may possess the ability to evaluate the quality control processes in a firm while the Indian standard differs and says that only a member of the Indian Institute can evaluate the quality. Further, the ISQC recognises that other organisations that specialise in providing Quality control services would also be recognised as experts for evaluating the quality processes in a firm, a concept very relevant in today’s fascination with ISO certifications. In a stark contrast to this the ICAI says that only its own members can evaluate their own quality.
Imagine a simple case of providing cross border services of translating a set of financial statements to a foreign GAAP. The ICAI would have us believe that the person who can evaluate the quality of work pertaining to the Foreign legislation, (very often in a different language) could only be a member of the Indian institute. It is increasingly common nowadays to seek Assurance from an audit firm on matters other than audits and reviews of historical financial statements.
It is in these types of engagements that the profession is witnessing growth and for these assignments it is very critical to use non financial experts to ensure quality execution. With this significant amendment to the quality control standard, only a member of ICAI can vouch for the quality control in such areas. This goes against the very grain of multidisciplinary partnerships that the Government is trying to usher in.
The Public Companies Oversight Board (PCAOB) recently announced that all firms registered with it, including innumerable Indian firms, would need to declare and file annual reports of billings by the firm, percentage of billings from audits and names of clients on the PCAOB’s website. This would run totally counter to the advertising rules legislated by ICAI last month where disclosure of client names and billings by the firm would tantamount to advertising.
The time has come for us to abandon age old guidelines and liberalise the profession. Could there be any truth in the view that the Information Technology industry of India could go forth and conquer the world because it did not have any regulator? And the mandarins did not understand information technology well enough to raise the walls of India specific laws? Is there a lesson in here for the Accounting profession?
The views expressed herein are the personal views of the author and do not necessarily represent the views of Ernst & Young Global or any of its member firms
