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| CA rules under government lens | |
| Anindita Dey / Mumbai March 2, 2009, 0:22 IST | |
The ministry of company affairs has begun a comprehensive review of the legal provisions and regulations governing chartered accountants following the Satyam accounting fraud that covers, among other issues, the operation of surrogate firms in India by large foreign audit firms.
Sources close to the development said a notification to this effect will be released soon. The Chartered Accountant Act, 1949, and the Chartered Accountant Regulations, 1988, form the basis for the profession in India.
On the issue of surrogate audit firms established by Indian chartered accountants that tie up with foreign firms, sources said there were “numerous anomalies”.
One of them is that the Indian firm bags an audit contract but the partner actually auditing the Indian company often belongs to the foreign firm, violating the Companies Act, 1956, and the Contract Act, 1872.
| WHAT’S UNDER THE SCANNER |
| * Govt may ban ‘surrogate’ audits, under which partners of foreign firms audit Indian companies for which the contract is bagged by the Indian audit partner |
| * Rules limiting audits to 30 per partner per audit firm may be scrapped or the limit raised |
| * Rotation of audit firms by companies, currently optional, may become mandatory |
He added that Indian arms of foreign firms have taken advantage of their tie-ups to make it a rule that audits must be conducted by their foreign partners for Indian companies approaching the overseas markets to raise funds or for mergers and acquisitions. No such rule exists, the source said, although the practice is common.
“We are, therefore, screening the partnership agreements of all these firms to analyse the legal basis on which the foreign firms audit Indian companies,” the source added.
Much of this will change, however, once the Limited Liability Partnership (LLP) Act, 2008, which enables foreign chartered accounting firms to set up audit practices in India, is notified. The Bill was passed by Parliament on December 12, 2008, but is yet to be notified.
Second, the rule of capping the number of audits per partner per firm may also be scrapped or the limit raised, to allow more freedom and competition. The rules currently allow 30 audits per partner per firm, but thinking in the government is that this rule tends to play down merit, since it means audit firms get business irrespective of their track record.
Also under review is the practice of rotating chartered accountants by companies in the interests of introducing more accountability and transparency in the profession. Currently an option, regulators think it makes companies stick to the same auditor for years, which may promote more accounting frauds.
The review is a joint exercise by the ministry and the industry and is based on feedback from various chartered accountant forums.
Among other issues under review are strengthening the monitoring of elections of the Institute of Chartered Accountants of India (ICAI), closer scrutiny of the books of the chartered accountant benevolent fund to ascertain its proper usage, and paid leave by companies and firms to allow chartered accountants to attend seminars and talks organised by ICAI. Such seminars are said to be important part of the learning process, so there is no reason for these not to be held on weekdays to ensure maximum participation.
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Discussion Board
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| RITESH |
March 04 , 2009 ,12:02 IST |
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| The issue raised is not of today infact it was raised long back, which can be checked from the link of Hindu business line published in Aug 28, 2002 http://www.blonnet.com/2002/08/28/stories/2002082802480300.htm
The issue is why has been ICAI silent for so many years. What were the reasons, that the profession has suferred for such a long time for lack of action and today the blame is trown on the same professional who has been the victim. |
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Reply by Ritesh: | March 04 , 2009 ,13:27 IST |
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On this regard a representation was gven by ICAI to the Ministry of Corporate Affairs in April 16, 2003, which can be checked from this link
http://india.smetoolkit.org/india/en/content/en/39346/White-Paper-On-Multinational-Accounting-Firms-Operating-In-India
Now The Second Question is Why the Ministry of Corporate Affairs has not taken any action then and today the same ministry comes back and says it wants to check.
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| kamleshdave |
March 03 , 2009 ,13:27 IST |
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| quite an essential steps better late then never |
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| Saurabh |
March 02 , 2009 ,11:39 IST |
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| Nice decision taken up by the Govt. and will help CA aspirants |
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Reply by ram: | March 03 , 2009 ,07:48 IST |
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The reward for ill-doing in this kali yuga,is encouragement to do more,with greater security of the ill-doings not getting disclosed or becoming transperant.
The administrative machinery that governs ICAI also governs another accounting regulator ICWAI,which is demanding for name change for 30 years now to reflect the true-value of that profession,it has also been demanding strengthening of the reporting requirements of the corporates through cost audit exercise,globally...well good works can always wait.
Satyameava Jayate |
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Reply by Sire: | March 02 , 2009 ,21:02 IST |
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We know oflate that ills of the economic and financial frauds are partnered and some times trigeered by the Accountants in public practice,it is unfortunate that the lawmakers still support a profession that is in shambles, |
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