1. Code of Ethics
The Ethical Standards Board of ICAI has given answers to some of the ethical issues raised by our members. These are published on pages 254-256 of CA. Journal for August, 2012. Some of these issues are as under:
(i) Issue:
Can a member in practice indicate in a book or an article, authored/contributed/ published by him, his association with any firm of Chartered Accountants?
As per Para (c) under Clause (6) of Part 1 of First Schedule to the Act as appearing in the Code of Ethics, 2009, a member is not permitted to indicate in a book or an article, authored/contributed/ published by him, the association with any firm of Chartered Accountants.
(ii) Issue:
Whether the word “Chartered Accountants” and name of city after the name of the members of the Institute be mentioned in the articles contributed by such members and published in the Institute’s Journal?
Under Clause (6) of Part 1 of the First Schedule to the Act, there is no restriction in the Code of Ethics for mentioning the word “Chartered Accountant” and also the name of city in an article contributed by a member in the Institute’s Journal as well as in newspapers and other periodicals.
(iii) Issue:
Whether sponsorship or prizes can be instituted in the name of Chartered Accountants or a firm of Chartered Accountants?
An individual Chartered Accountant or a firm of Chartered Accountants can institute or sponsor prizes, provided that the designation “Chartered Accountant”, is not appended to the prize and the Clause (6) of the First Schedule regarding advertisement and publicity is complied with.
(iv) Issue:
Can a Chartered Accountants firm give advertisement in relation to Silver, Diamond, Platinum or Centenary celebration of the firm?
While considering the implications of Clause (6) & (7) of Part 1 of the First Schedule of the Act in relation to such advertisements and also the need of interpersonal socialisation/relationship of the members through such get-together occasions, the advertisement for Silver, Diamond, Platinum and Centenary celebrations of the firms has been permitted to be published in any newspaper or in the newsletters.
(v) Issue:
A Chartered Accountants firm issued circulars to the non-clients that a Chartered Accountant who was the former partner in-charge of Taxation of one of the largest accounting firms of the world, had joined them as partner. Can they do it?
Clause (6) of Part 1 of the First Schedule to the Act prohibits solicitation of clients or performing work either directly or indirectly by circular, advertisement, personal communication or interview or by any “other means”. The issuance of circular to persons who are not clients, but may likely require services of a chartered accountant would be tantamount to advertisement, since it is solicitation of professional work by making roving enquiries. As per Clause (7) of Part 1 of the First Schedule to the Act, the usage of the words “one of the largest accounting firms of the World” and the specification of specialisation in “taxation” would also amount to advertisement and, thus, constitute professional misconduct.
2. EAC Opinion
Accounting Treatment of Liability for Unbilled Work-in-Progress in the Books of Executing Agency.
Facts:
A government company was set up as a special purpose vehicle for executing the infrastructure development and related projects in a State with quality and speed. The projects are identified by the Government and these projects are entrusted for execution to the company.
For executing the projects, the company engages the services of various contractors who are required to use their own men, materials and machines and the company does not supply any of these. The company has also clarified that it has not received the projects from the Government in the capacity of a contractor, rather, the Government has entrusted the work in the capacity of executing agency through Memorandum of Understanding (MOU). The projects have not been sub-contracted by the company. Further, as per the company, the ownership interest relating to contract assets and liabilities vest with the Government.
The company is not raising any bill for the work executed by it. The company is charging development fees at certain pre-fixed percentage of the development expenditure incurred, to the Government towards the services rendered.
As per agreed terms of contract, the contractor raises running account (R.A.) bills on the company for the work done by him and final bill is raised after completion of the project. The billing period generally falls into two or more financial years.
The company is providing for the liability towards work executed upto the financial year end based on bills received till the finalisation of accounts. However, on the basis of advice from the Comptroller and Auditor General of India (CAG), the company started providing for work executed till financial year end towards the work for which bills have not been received on the basis of estimated value worked out by the engineering department of the company.
Query:
On the above facts, the company has sought the opinion of the Expert Advisory Committee as to whether or not the company should recognise liability in respect of unbilled work-in-progress.
Opinion:
The Committee notes from the Facts of the Case that the company in this case is acting merely as an execution agency of the Government, for which it is getting a development fee for rendering its services. The Committee further notes that the terms ‘Assets’ and ‘Liabilities’ are defined in paragraphs 49(a) and 49(b) respectively of the ‘Framework for the Preparation and Presentation of Financial Statements’.
After considering the said paragraphs, the Committee notes that in this case, the future economic benefits from the project assets are not expected to flow to the company. On completion of the project, the assets would be taken over by the Government. Further, the Committee notes from the MOU between the company and the Government that the project assets are not funded by the company. In substance, they are funded by the Government. Accordingly, the liabilities which arise during the transactions are those of the Government and not that of the company. Thus, all the significant risks and rewards relating to the ownership of project assets and liabilities vest with the Government. In so far as the company is concerned, the Committee is of the view that the project assets and project liabilities do not meet the definitions of “Assets and Liability” respectively and as such, the project assets and liabilities of the said business should not be recorded in the books of account of the company.
On the basis of the above, the Committee is of the view that the liability for work-in-progress and the corresponding asset, viz. the work-in-progress (billed or unbilled) in respect of the project, if any, should not be recognized in the books of account of the company.
[Pl. refer pages 287 to 289 of C. A. Journal of August, 2012]
3. Examination Results
(i) Results for CA Final Examination held in May, 2012, were declared in July, 2012. 16.38% candidates passed in Both Groups. 25.32% candidates passed in Group I and 29.62% passed in Group II. Abhishek Gupta (Kolkata), Divyang Bhandari (Chennai) and Shruti Sodhani (Bangalore) secured 1st , 2nd , and 3rd Rank respectively in the Final Examination.
(ii) Results for CPT examination held on 17-6-2012 have been declared. 37.56% of candidates passed in this examination. Girls have taken a lead over Boys by a margin of 2% i.e. 40.04% against 37.56%
(Refer Page 238 of CA Journal of August, 2012.)
4. Elections to Regional and Central Council
The next elections to the Central Council and Regional Councils of ICAI are scheduled to be held on Friday, 7th December and Saturday, 8th December, 2012 in cities having more than 2,500 Members. In other places, the elections will be held on Saturday, 8th December, 2012. Members from Mumbai, Kolkata and New Delhi, where there are more than one polling booth, have option to select the booth of their choice. For this purpose, they have to exercise option in writing before the specified date. Full details about the procedure for elections is hosted on ICAI website www.icai.org (Refer Page 362 of CA Journal of August, 2012).
5. ICAI News
(Note : Page Nos. given below are from CA Journal of August, 2012)
(i) New ICAI Publications
(a) Compendium of Accounting Standards (Up dated as on 1-7-2012) (P. 376)
(b) Technical Guide on Internal Audit of Infrastructure Industry (P. 377)
(c) Technical Guide on Internal Audit of Not-for-profit Organisation ) (P. 377)
(d) Technical Guide on Internal Audit of Mining and Extractive Industry (P. 378)
(ii) Annual Membership Fees
Annual Membership Fees for 2012-13 can be paid on or before 30-9-2012 (P. 387)
(iii) Certificate Courses
Members can take advantage of Certificate Courses conducted by ICAI, including those on Indirect Taxes, Enterprise Risk Management, Concurrent Audit of Banks, Internal Audit, Master in Business Finance, International Taxation, Forensic Accounting & Fraud Detection using IT & CAATs and International Financial Reporting Standards. Interested members must consult ICAI website for the list of the complete courses available. Many post-qualification courses are available to promote and enhance members’ career prospects. List of these courses include Information Systems Audit (ISA), CPE Course on Computer Accounting and Auditing Techniques (CAAT), Diploma in Insurance and Risk Management (DIRM), etc.: for complete list of such courses, members must refer to ICAI website (Page 250).
(iv) International Assignments
Members interested in international assisnments can take advantage of the existing memorandums of understanding (MoUs), mutual recognition agree-ment (MRAs), and joint declarations of ICAI with international institutions. The list is available on the ICAI website. At present, there is an MRA with The Canadian Institute of Chartered Accountants (CICA), CPA Australia and CPA Ireland. ICAI has MoUs with The Institute of Chartered Accountants in Australia (ICAA), The Institute of Chartered Accountants in England and Wales (ICAEW), Higher Colleges Of Technology, Ministry Of Higher Education And Scientific Research, UAE, and University of Djbouti. ICAI has signed a joint declaration with the Bahrain Institute of Banking and Finance and a License Agreement with ISACA (Page 250).
