Challenges Faced by Professional Firms

In the context of the changes in the business pattern in India during the last two decades both the professions are required to work shoulder to shoulder acting as supplement to the services rendered by each other.

Over the past few years, we have witnessed unprecedented economic advancement and growth, which has resulted in the globalisation of the world’s economies and has opened up the world’s economies. This wave of globalisation and economic progress has resulted in huge opportunities and potential for businesses to expand their footprint all over the world. This, coupled with the rapid growth of the Internet has resulted in a truly global market place. It has literally resulted in a ‘world without borders’. India has been at the centre stage of this economic revolution over the past decade. Over the years, India has witnessed a large amount of both inbound and outbound foreign investments. Today, leading companies from all over the world are either in India, or are queuing up to enter. Similarly, numerous Indian businesses have acquired or are acquiring businesses outside the country. Over and above this, with the inflow and outflow of investments, businesses have begun to scale up and have today reached enormous sizes, scales that could not have ever been imagined a few years ago. All of this has resulted in a huge demand for professional services. The changing economy has resulted in a complete change in the operating dynamics of professionals. I propose to deal with some of the common issues and challenges faced by law and accountancy professional firms in today’s changing times.

The role of a professional has evolved dramatically over the past few years and is far different from what it used to be a few years ago. The increase in demand for professional services has resulted in a very large growth in the professional service space. Every day, there are new entrants in the sector, resulting in intense competition. With the increasing demand of professional services, professionals are facing new challenges and new burdens every day.

Earlier, whilst any professional had to contend with a certain limited number of issues, the number of issues faced by them today have increased greatly. This can be attributed to various factors. With economic progress, business transactions are becoming more and more complex by the day. Businesses are becoming more competitive and focussed on factors like growth, performance, etc. Further, the ever-changing economic landscape and globalisation have resulted in new and complex legislations and regulations being introduced by lawmakers.

As a result, the need for professional advice on business transactions or on legislations has become ever increasing. This has therefore resulted in a great demand for services of professionals and more so for accountants and lawyers. This great demand for the services of professionals has resulted in an unprecedented number of new entrants into both the professions, which has resulted in an increase in competition amongst professionals themselves. Whilst, the entry of an increasing number of professionals in any field is always welcome, it has triggered intense competition amongst rival firms. It may be argued that with the present growth in the economy, there is enough space for a large number of new upcoming professionals to enter into the professions and grow. But at the same time, it is interesting to note that the increasing competition has resulted in various issues, which professionals may not have faced earlier.

Some of the major issues faced by a professional (whether a lawyer or a chartered accountant), in carrying on his profession today are:

(i) Professional ethics

(ii) Professional responsibility;

(iii) Professional liability;

(iv) Building and retaining teams;

(v) Keeping abreast with the latest updates;

(vi) Advertising/promoting services;

 Let us now examine these issues in detail.

(i) Professional ethics

Both the legal and the accountancy professions have their own rules of professional ethics. The Chartered Accountants Act, 1949 and the Regulations made thereunder prescribe certain rules in this behalf. Similarly, the Advocates Act, 1961 and the Bar Council Regulations govern the legal profession. Professional ethics are codes of practice that have been laid down by bodies governing the profession to ensure that the highest standards of integrity and professionalism are maintained in the profession. Each professional organisation must ensure that the ethics and codes laid down in that profession are followed. A professional is a person who is specially trained and possesses specialised skills and knowledge. He must, in providing his services, adhere to the highest standards of ethics to ensure that not only the interests of his client are safeguarded but also that standard of his profession are maintained. Some of the virtues that fall within the ambit of professional ethics are virtues like honesty, integrity, transparency, etc. Of late, various incidents have come to light where leading professionals from large professional service firms have been caught committing certain acts in the course of their professional duties which go against the very basic canon of their profession and against the basic virtues of professional ethics. At this juncture, one would question as to why would a professional who is associated with a multi-national firm at a very senior level, become involved in such acts. The answer to that question is quite simple. With increasing competition amongst professionals, clients often try to pressurise a professional to commit acts or give them advice as per their needs. The professional, in the fear of losing the business of the client, is likely to buckle down under the pressure of the client and do whatever is required of him to retain such a client. This sort of pressure often leads to professionals committing various acts which are against the very basic guidelines/codes that are governing them. Though it is important in today’s time to retain clients and expand, a professional must never forget his duties and must always carry out the same within the prescribed boundaries.

ii) Professional responsibility

Similarly, professionals have a responsibility to their clients. They must act in a responsible manner and must ensure that there is no breach of fiduciary duties on their part whilst dealing with clients. In a large firm, where there are a large number of partners and senior associates, it is possible that the firm may, unknowingly take up an assignments, which is conflicting in interest with some other assignment being handled by the firm. Such a situation must be avoided and the firm must take steps and build systems to ensure that there is no conflict of interest between the firms’ clients. Another important aspect that a firm must safeguard is confidentiality of clients’ information. A firm must ensure that the clients information that has been provided to it must be kept confidential and that the same should not ever be revealed by any person, save and except in the manner prescribed under law or authorised by the client.

(iii) Professional liability

A professional in exercising his duties and advising his clients, must always exercise due care and caution and ensure that he has fulfilled his duties to the best of his ability. A professional must ensure that he has considered and reviewed all possible scenarios before advising the client. Professionals, being experts in their respective fields, are liable to their clients for any act of negligence on their part. A client comes to a professional because a professional is an expert in the field and that he possesses specialised knowledge. At the same time, since a professional is an expert in his field, he must ensure that he takes greater care and caution when advising his client as compared to an ordinary person. A professional would thus be responsible to his client in the event that a client suffers and harm or prejudice as a result of any act of negligence on the part of the professional.

(iv) Building and retaining teams

With increasing competition amongst professionals today, a major challenge faced by firms is that of attracting and retaining the best manpower. Over the years, the number of persons entering various professions has greatly increased. This has resulted in a huge pool of manpower being made available to firms to choose from. Even then, there is an intense competition amongst firms to select the best talent that is available. Firms today invest huge amount of time, effort and money in training associates to ensure that they are able to offer best services to the clients. However, with increasing competition and increasing amount of work, there is always a dearth of good talent that is available at any time. Competing firms are always looking out for good talent. A firm must ensure that it retains good talent by not only offering good remuneration but by also providing a good working environment.

(v) Updated knowledge
As stated above, with the ever-changing economic climate and with new developments taking place practically on a daily basis, it is important for professionals to always keep themselves updated and abreast with all the latest developments in their fields. With the advent of technology, it has become relatively simple and easy for one to keep updated with the latest developments at all times. Referring to and using tools like the Internet, e-mail, news media, academic journals, etc., are helpful in ensuring that one is updated with the ever-changing situation in ones profession at all times.

(vi) Advertising

The increasing demand for professional services and the increase in the number of professionals offering such services has resulted in intense competition amongst rival professionals. In India, till date, both the legal and accountancy professions have restrictions on advertising, which by and large restrict professionals from advertising their services. Recently, Bar Council of India which governs the legal profession has allowed lawyer/law firms to set up websites but with limited information. Of late, we have also witnessed a large number of professional firms being associated with various events organised by various bodies, chambers, societies, etc. now whereby representatives of such firm make presentations/speak at such events. Another practice that is gaining quick popularity amongst professionals is of publishing articles/research papers/reports across various media like newspapers, journals, magazines and on the Internet.

From the above, we can see the number of common issues and challenges faced by both the professions in todays times. Whilst, the picture is rosy and there is great potential on the horizon for both the professions, the professions of lawyers and chartered accountants have largely benefited by the recent upturn of economy and increase of high-value business transactions. Both the professions have been working as complimentary to each other and as a result, the client gets the advantage of double expertise. Let us hope this sangam will get stronger day by day.

Before I end, I would like to refer to one recent trend which I consider to be against the interest of the clients and may even term it as dangerous. Some chartered accountant firms have been keeping lawyers on their role and try to render legal services to the clients including drafting of complicated documents while some law firms have recruited chartered accountants on their staff, with a view to extend the services to be offered to the clients. It is felt that the junior-level assistance availed in this way may not do proper justice to the clients and is even likely to affect the quality of the services needed in a particular case. It would be in the ultimate benefit of the clients if each profession sticks to its own expertise without trying to encroach upon the field of the other.