ICAI - Will watchdogs on a tighter leash turn bloodhounds?
March, 12th 2009
Uppermost in the agenda of the new chief of the Institute of Chartered Accountants of India (ICAI), Mr Uttam Prakash Agarwal, is the Satyam problem. Members should not lose heart but must act proactively to safeguard the interests of all stakeholders, he calls out to CAs, from the pulpit of The Chartered Accountant journal, March 2009. This is the time to stand united in the face of adversity. The Institute will also do everything in its power to ensure that not even an iota of doubt is cast upon the profession, he declares.
On Holi, it is a cheerful Hindi song that greets me as the chime when I call Mr Agarwal on a tough-to-procure mobile phone number, and he cheerfully agrees to answer over the email a few questions from Business Line. Befitting the freshness of the youthful looks that he brings the prezs chair, he sounds passionate about agriculture and global warming, CA Pariwar and CSR (corporate social responsibility), and lots more.
He is emphatic in his exhortations to the CA fraternity to reach out to a vast section of people who have always considered CAs only as number crunchers and bring the human touch by undertaking social and charitable causes, and to energise agriculture by providing market intelligence, preparing feasibility and project studies, educating the farmers and regulating their lines of credit, establishing standards and guidelines on valuation, suggesting new insurance products in this sector and new derivative products to insure against price fluctuations and introducing new market mechanisms to help producers sell their products.
These are just a few of the endless opportunities that agriculture can provide to the profession, urges Mr Agarwal, through his monthly missive, that promises to be as predictably rhetorical as during any other previous terms of leadership. But alas, or thankfully, the term of a president is only a year.
Excerpts from the interview.
You assumed office at one of the most tumultuous points in the history of the accounting profession in the country. What do you see as the most immediate challenges before the Institute?
First of all let me tell you there is no challenge before the Institute or the accounting profession in the country since its only the perception of the public at large. Simply because, it involves the action of one member, out of 1,55,000 members, which again has not been brought on record by any of the agencies working for the last two months including the newly-constituted Satyam Board.
Everybody knows that in every profession there are some people who try to do wrong; but that does not mean the whole fraternity is not discharging its obligations. However, as the president of the ICAI, I will see that the most tightened auditing norms are introduced. I will also ensure that representations are made before the regulators to safeguard the independence of chartered accountants.
As a 60-year-old, does the ICAI continue to attract young talent towards its courses, as students, especially when the assurance practice is becoming increasingly onerous, and the tax practice is continually shrinking as a result of greater technology adoption within the Department?
Of course, yes. Every year around 90,000 young talented students are enrolling for the CA course. Let us remember that CAs are not only compliance officers but can also be business solution providers. Out of around 12,000 members qualified (annually), nearly 90 per cent CAs move towards the industry, that too the IT sector, KPO, asset management, risk management, treasury operations, investment advisory, capital markets, project finance and retailing sectors. In the years to come, we can see more of the young talented students continuing to join the CA course. And I can assure you that next 20 years will belong to chartered accountants like the previous 10 years that belonged to the IT sector.
In the light of recent developments that shook the corporate world, has it now become necessary to widen the scope of audit work to include a few essential forensic steps? Are there also some best practices that we can adopt from around the world, to improve the quality of assurance services?
Yes. We will be widening the scope of the audit work with not only the essential forensic steps; we will also be tightening our auditing norms by creating awareness amongst the members about our existing 35 Auditing Standards through conferences, seminars, and workshops, making it compulsory at least for 1/2-1 hour discussion.
At present, our members are performing their duty as watchdog but they may extend their scope like the bloodhound. Our Auditing Standards are also based on international practices.
Satyam is the only first scam in this country as compared to one every 3 months in the international markets. That too the fraud was totally planned by the management along with hundreds of professionals including MBAs from the top institutes.
What are the forthcoming standards and pronouncements from the Institute, during the next 6-12 months?
As far as new forthcoming standards and pronouncements from the Institute are concerned, council has already announced that we are going for convergence with the IFRS from 2011 and making our members and students fully trained through various workshops and certification courses.
Coming under multiple pressures, is there a higher probability of earnings management by companies when the fiscal year end results become due? How can such practices be averted or monitored?
Of course this should be done on the spot by the regulators who regulate the corporate world. We are only regulating our members, through FRRB, peer review, disciplinary mechanism and CPE hours.
Do you foresee the Government and the market regulators bringing in tighter norms of disclosure? Would it be advisable for the Institute to proactively suggest newer and fine-tuned measures for voluntary disclosure in annual reports, to facilitate better investment decision-making?
We have formed a committee at the Institute to go through the existing disclosure norms and suggest newer and fine-tuned measures for voluntary disclosure in annual reports, to facilitate better investment decision-making. But I would like to emphasise on the issue that investors are not going through the auditor qualification in the auditors reports and notes to the accounts before making investments. Investors keep on investing on the basis of market trend and the hearsay from unreliable sources. If we suggest some new disclosure notes what is the guarantee that in the near future there will not be any fiasco like Satyam?
As the helmsman of the premier accounting body, are you planning to tone up the governance of the Institute? Also, will your term see progress in the transparency levels of professional governance?
Yes. If you visit our website of ICAI you will see that there are transparency levels of professional governance. The ICAI is being fully governed on the principles of transparency, professional governance, and selfless service by the elected council members with accountability.