Why is it that in India bad news hogs the headlines, whereas we tend to gloss over all the good things that we achieve? People would have read ad nauseam about the so-called “Satyam Scam” but I am yet to see any major newspaper highlighting the fact that while in the comparable ‘Enron scandal’ the company was liquidated, shareholders lost their money, old retired pensioners were impoverished, employees were driven out on the street and one of the world’s largest accounting firms collapsed rendering many more people jobless.
In India due to the efficient manner in which our Ministry of Corporate Affairs (MCA) functioned, not a single stakeholder suffered, and in quite an understated way, in a public-private partnership initiative which had few parallels, the company was rescued. How many of us know that with the MCA 21 e-initiative, India is among a few leading countries in the world to have computerised and e-enabled its corporate law administration data and processes. It is all the more astounding when we ralise that, in spite, of the sheer number of corporates and the number of permissions, exemptions, etc., that have to be filed and processed regularly, this system works efficiently.
Given its track record and professionalism, naturally, the expectations from the ministry in the coming months are very high. What would a citizen, like myself, want to see on the agenda of the ministry?
First and foremost, the ministry must steer through the Companies Bill. This bill has been in the works literally for decades and a quick and fast overhaul of the Companies Act is required to enable corporates concentrate on their core business and not get bogged down in the intricacies of procedural compliances.
The MCA must enable investors’ protection and class actions through legislative and judicial reforms.
As against developed economies which have an average of one chartered accountant (CA) for every 800 people in its population, India has an extremely low ratio of one CA for every 9,000 persons. With the emergence India on the global economic scene and the inclusiveness and deepening of reforms which would energise and stimulate entities functioning of the grassroot level in the villages, we would have to have more efficient accounting systems, control systems, systems for correlating outcomes with inputs and ensuring that every additional rupee is spent for the optimum effect. This would not be possible without ensuring that there is an efficient audit and accounting system at the smallest unit level and the present strength of CAs in the country is highly inadequate for that.
CAs, cost accountants and company secretaries have a huge overlap on syllabi and basic professional education. It is difficult to see why the three institutes cannot be merged into one while still retaining the specialism of its existig members (CAs to do audits, cost accountants to do cost audits and company secretaries to act as company law experts), while enabling each class of members to appear for a minimal “top up exam” and, thereby, acquire membership of the other class as well. This will significantly cut down administrative costs, consolidate hard and soft assets of the Institutes as well as lead to making the brightest and most competent in the profession available for serving the combined profession.
It will also minimise regulatory duplication of efforts by MCA and its nominees on various boards and sub-committees of the various Institutes. This proposal was first mooted by the joint committee on the future of the accountancy profession in 1967-68. While the council of Institute of Chartered accountant of India (ICAI) had unanimously accepted the amalgamation recommendation in 1967-68, Institute of cost & works accountants of India (ICWAI) went back and rejected this proposition. Again in 1970, the Government of India tried to unify the profession but could not succeed. The last attempt to my knowledge was in 1998-99.
As in the practice in all other developed economies, the MCA should actively aid the development and empowerment of an independent regulator with oversight over the profession. The Quality Review Board may be empowered to take on this responsibility.
The MCA should give a fillip to practicing the profession of accounting in the limited liability partnership by advising all the Institutes under its remit to speed up enabling amendments to their regulations.
The MCA must above all ensure delivery of quality assurance by audit professionals to the investors in the country. That will only be possible by raising the bar on quality and expediting all disciplinary cases which are pure-play quality matters. This can only be done if other relative immaterial provisions of the Act which are all treated at par with issues of quality are eliminated.
The MCA must ensure that India with its 2nd largest profession in the world (largest if all Institutes converge) should be strongly represented on the Global Regulatory Bodies of the Accounting Professions, the International Federation of Accountants, International Accounting Standards Board and International Forum of Independent Audit Regulators, Such representation must be by the best, must ensure continuity and should not be looked upon as “spoils of the office” by members of the Institute.
A tall order, but the MCA has inspired confidence and there is no reason why they would not be able to deliver on this.
Rahul Roy, director, Ernst & Young India Pvt. Ltd