Bharat and BCAS – The March Towards a Centenary
It is heartening to note that on 6th July, 2024, BCAS will complete 75 years. Even the CA profession in India is completing 75 years, as ICAI was established on 1st July, 1949. Two years back, India or Bharat completed its 75 years of independence. Therefore, the theme for this special issue is “Bharat and BCAS March Towards Centenary”. At the Government level, the period of 25 years from the 75th anniversary to the 100th anniversary is regarded as an “Amrit Kaal”, with the objective of “Viksit Bharat” which means “Developed India”.
With the above theme in mind, this issue of the Journal contains thought-provoking articles on important aspects of India by leading domain experts in the fields of Law and Judiciary, Education, etc. I hope that the thoughts expressed here will help set India on the road map towards becoming Viksit Bharat.
Turning to 75 years of the CA Profession and looking to the future, we can say that we have a glorious past, are witnessing a difficult present but are hopeful of a bright future. The entire world is passing through a tumultuous transition, and the CA Profession is no exception. Disruptive technologies, disruptive ideas and expectations rule the world. Let us look at two traditional core areas of CA practice: Audit and Taxation. Both these areas of practice have undergone significant changes, which are continuing at a huge speed and on an unprecedented scale.
AUDIT AND ASSURANCE PRACTICE
In the good old days, Auditors were expected to audit manually and express their opinion on the true and fair state of the financial accounts. However, over a period of time, expectations from Auditors have increased significantly. Today, the Auditor is expected to have a 360-degree view of the state of affairs and to give an assurance to all stakeholders. This requires reasonably sound knowledge of various statutes, which may not be his domains of expertise. If anything goes wrong in a company, the Auditor comes under the scanner. He may be charged with negligence, incompetence, etc., till such time he proves his innocence beyond doubt. Auditing has become a high risk and less rewarding job if measured in terms of health and mental peace.
Now the Auditor is answerable to multiple regulators and agencies such as NFRA, ICAI, SEBI, NCLT, RBI, CBDT, GST Authorities, Customs, MCA, and many others. The code of conduct prescribed by ICAI with good intentions puts onerous responsibilities on Auditors and conflicting obligations. For example, amendments to the Code of Ethics by ICAI, applicable w.e.f. 1st October, 2022, requires CA Employees and Auditors of Listed Companies to respond to Non-Compliance with Laws and Regulations (NOCLAR) about which they become aware during their engagement. The provisions of NOCLAR are quite onerous in nature1. The provisions of Tax Audit are now so framed that a Tax Auditor virtually does assessment of his client on behalf of the Assessing Officer, without being remunerated by the latter. He is expected not only to express an opinion on the true and fair view of the accounts but also to deliver his view on the import of various provisions where he and the auditee may have a genuine difference. System-driven reporting makes his job difficult and the AI-driven processing of his reports renders his life miserable.
1. Refer Editorial of June 2023 for the detailed discussion on the provisions of NOCLAR
The advent of ESG (Environment, Sustainability and Governance) Reporting has necessitated a different skill set from Auditors. An Auditor is supposed to assess the sustainability of the business and comment on the governance of the organisation. This shows a clear shift of auditing functions and expectations from the traditional role of assuring true accounting and opining on financials. The ever-increasing burden results in Auditors being cast with the title of “Conscience Keeper” for various stakeholders. The profession should be conscious of the heavy price that may have to be paid on account of this title, in terms of health and reputation. There is a limit to the responsibilities that one can shoulder.
THE ROAD AHEAD
Looking at the applicability of various statutes, varied expectations from stakeholders, sophistication in technology, numerous regulators, etc., in discharging audit function, it appears that very soon MSME firms will be out of this space. The time has come for multidisciplinary audit firms where different domain experts conduct audit as a team with joint and several responsibilities. Indemnity insurance will become a necessity for large audits and may be made compulsory.
Perhaps, additional pre-qualifications / requirements may be introduced for large private sector audits, just as prevalent today for audit of banks and PSUs. Once AI tools stabilise, their use may be made mandatory to eliminate human errors and ensure accuracy of data. The profession needs to accept, adopt and adapt to these challenges but with clarity on its role and responsibility. Dialogues need to take place with stakeholders (including regulators and agencies) and clarity needs to emerge as to the realistic expectations from Auditors, thus reducing or eliminating expectation gaps. It is here that the profession hopes that its alma mater, ICAI, will play a role.
TAX PRACTICE
Direct tax practice has been a stronghold of CA professionals since inception. However, here too, there is a significant shift, with more thrust on compliances. Readymade software has made computation of income easy. Information collated in the AIS form by the Income-tax department from various sources makes it impossible to hide any income. It also acts as a reminder and helps a taxpayer to disclose his income accurately. Online filing and e-compliances have made life quite simple.
Corruption in assessment and litigation was a major hurdle in tax practice. To address the menace of corruption, the government introduced Faceless Assessments and Faceless Appeals. Some experiences of Faceless Assessments have been really encouraging, despite difficulties in passive communication. A lot more still needs to be done. Possibly, a calibrated approach, with incremental coverage may help in solving the current crisis of huge pendency.
FUTURE OF TAX PRACTICE
The reopening of assessments based on audit objections, change of opinion and one-off Tribunal decisions continues to clog the judiciary with tax writ petitions. The objective of achieving early finality to tax assessments remains a pipedream, with the issue of summons by tax authorities to seek roving information which could form the basis for reassessment, in effect, assessment by the backdoor. The trust deficit between the government and taxpayers still continues, despite buoyancy in tax collections. Technology and the use of AI has enabled the Income-tax Department to collate information from various sources. Linking Aadhar with PAN will help in collecting various details of taxpayers / non-taxpayers, including investments and property dealings. India has signed a number of Automatic Exchange of Information Agreements, through which it seamlessly obtains details of overseas transactions of Indians.
Professionals too will have to adapt technology, use AI for preparing written submissions and be conservative in advising clients to avoid long drawn litigations and uncertainty. CAs should also be careful in advising clients and ensure that their advices are compliant with General Anti Avoidance Regulations (GAAR), Specific Anti Avoidance Regulations (SAAR), Prevention of Money Laundering Act (PMLA), Black Money Act (BMA) and any other applicable laws and regulations. The cost of litigation is increasing not only in terms of money but time and loss of opportunities. It is time the profession reminds its clients the age-old maxim, “Discretion is better than Valour”.
THE FUTURE OF THE PROFESSION
With India poised to become the third largest economy of the world, the demand for CAs will certainly go up. With a majority of CAs opting for industry roles, practicing CAs will be more in demand.
Realising the need for more CAs, ICAI has reduced the tenure of articleship from three to two years and will conduct CA exams thrice a year, instead of twice a year. CAs should continuously upgrade their knowledge and skills by attending educational programs offered by ICAI and voluntary professional bodies such as BCAS. The need of the hour for the CA profession is to introspect, raise standards by ethical practices, stop undercutting and continue to serve the Nation with vigor and enthusiasm, as CAs are torch bearers in Nation Building!
Wish you a happy CA and BCAS Founding Day!
