ICAI — A seat at the high table

Last month witnessed two significant events essential for the
coming of age of the Indian accounting profession. To start with, The Institute
of Chartered Accountants of India (ICAI) signed an MoU with the Institute of
Chartered Accountants of England & Wales (ICAEW) permitting the members of
either institute to acquire membership of the other by clearing a minimal number
of exams. This, definitely, is a great achievement for the ICAI, and the entire
leadership behind it deserves to be congratulated. This is a goal which was
being pursued for more than one and a half decade. Mutual recognition between
India and the UK was undone in the early ‘90s by measures taken by the Board of
Trade in the UK and the Indian leg of the recognition was withdrawn in the mid
‘90s. At the same time when industry, trade & commerce was increasingly becoming
borderless, Indian accountants were fenced within the political boundaries of
India. This MoU has the potential of defeating the isolation decade and making
the Indian profession become a truly global player. The European Commission (EC)
made a landmark announcement last week. The Generally Accepted Accounting
Principles (GAAP) of six countries of the world — United States, Japan, Canada,
India, China and South Korea — were declared to be equivalent to International
Financial Reporting Standards (IFRS). This followed a positive opinion given by
the European Parliament and all member states to the European Securities
Committee in the previous month. While this is a testimony to the application
and rigor of accounting standards in India, it also acknowledges the fact that
the fundamental genetic material of Indian accounting standards are the purveyor
of IFRS. Though these developments would definitely bring cheer in these gloomy
times, but at the same time, there is a pertinent clause added to it. In its
announcement, the EC said that the situation in four of these six countries,
i.e., India, China, Canada and South Korea, would be reviewed no later than
2011. Also the EC would regularly monitor the ongoing status of equivalence and
report to the member states and Parliament. Thus, we cannot remove our foot from
the accelerator of convergence to global standards. India’s growing clout in the
accounting world has a lot to do with its status as an emerging economy with a
strong growth rate and deep-pocket investors who are venturing abroad. It is a
matter of pride that India has more than 200 companies, many of them medium
sized, whose debt or equity is listed in Europe. Membership of this exclusive
club brings many responsibilities and expectations. In addition to converging
with IFRS by 2011, and continuing to satisfy EC equivalence criteria in the
forthcoming equivalence tests, we would have to converge our auditing standards,
—particularly the standards for joint audits. The market place, regulators and
ICAI will have to move towards the international goal of ‘qualification free’
public balance sheets, where accounts are recast in order to remove audit
qualifications before they are accepted in a public domain. The MCA in its new
Companies Bill has proposed independence requirements, which would help in
achieving convergence with global independence standards. The logical extension
of all such convergences is to encourage multi-disciplinary partnerships and the
Government has already done its bit by amending the CA Act to permit it. The
Securities Exchange Commission (SEC) has also voted on the necessity of its 500
largest companies to file financial reports from 2009 using the Extensible
Business Reporting Language (XBRL). Similar adoption of XBRL by a number of
other developed countries would mean that India would also have to soon walk on
that path. Sebi has already constituted a committee and this will be the next
big thing that will occupy our attention. A seat at the high table comes with a
lot of obligations, but also with unique opportunities. Opportunities to place
the concerns of the emerging economies on the world stage; opportunities to take
leadership in developing SME (Small, Medium Enterprise) focussed standards;
opportunities to highlight the talent in the country; opportunity to open up new
horizons of global mobility for our professionals.

(Source : Internet, 22-12-2008)