ACCOUNTABILITY OF THE ACCOUNTING PROFESSION

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Introduction Every profession has an objective and purpose for its origin and sustenance. Accounting profession is no exception. While the role and significance of the accounting profession keeps evolving to match with the changing expectations of the stakeholders, laws and regulations, the underlying philosophy remains constant. The commitment of the profession to the society is enshrined in the motto adopted by The Institute of Chartered Accountants of India (ICAI) from the Kathopanishad – “Ya esa suptesu jagarti” – “That person who is awake in those that sleep”. The accounting profession is the conscience keeper of the finance world as its members perform the accounting and auditing and assurance services. The profession is recognised as a partner in nation building as its members provide value added services to business enterprises in terms of planning, budgeting, funding, restructuring, strategising growth and expansion, cost optimisation so on and so forth.

Evolution 

Even before India became a Republic in 1950, the Gov-ernment of India enacted “The Chartered Accountants Act, 1949” and conferred the statutory and special recognition on the profession by chartering it and conferring autonomy on ICAI. This demonstrates the importance attributed to our profession by the Parliament and the need to regulate it with sound principles and standards. Since then, the profession has grown from strength to strength evolving its journey into a glorious history. The various milestones accomplished by its members reflect the astute wisdom acquired out of a sound learning process and robust practical training besides the recognition of our role given by the society. At the same time, we must acknowledge that autonomy comes with accountability and recognition is tagged on with responsibility. Assuming there are two professionals- one a member of our profession and another a non-member, with similar skills sets and knowledge, a client would prefer a member of our profession as there is a regulatory mechanism governing the profession and accountability in the case of a Chartered Accountant is better ensured than such a non-member. Accountability, therefore, is not a dis-advantage but an inherent strength of the profession.

In terms of membership strength, there has been phenomenal growth in the last one decade and consider-able number of members has been taking up employment in preference to public practice on account of enlarging opportunities in the industry. The following data demonstrates the shift in strength from public practice (COP) to employment (No COP) which also drives home the point that the profession is gaining more recognition in the in-house decision making and administration positions within the business segment. Instead of merely providing inputs for decision making, many of our members have attained positions whereby they are the decision makers for the business enterprise at the helm of affairs. There are many members who are CEOs and CFOs rendering yeomen service to the Industry segment of the Economy. The data also indicates that about 50% of them have entered the profession in the last one decade and therefore they all must be below the age of 35 years.

Scaling up with Quality

Out of the 1.2 billion population in India, only 2.17 lakh are qualified members of the profession. About a million students are pursuing the curriculum of our profession in various stages. Considering the fact that 47.5% of the 1.2 billion are youth below the age of 25 years, India has the demographic advantage of possessing substantial size of young population. Our profession can embrace good number of this segment in order to enable them to emerge as Chartered Accountants. This proposition may be fraught with two apprehensions namely, increase in number might lead to degeneration in standards and emergence of more professionals might lead to unemployment. Both these concerns do merit attention but can be effectively addressed by taking appropriate measures. We must ensure that quantity does not result in compromising of quality. The content of the curriculum, the examination and evalu-ation methodology and above all practical training and orientation should be constantly reviewed, monitored and implemented to match with the best expectations of the market. Further, the blending of technological skills with professional skills should be seamlessly and progressively done to equip the members to plunge into newer areas of services.

India has immense potential to emerge as a strong economic power being the third fastest growing economy next only to China and Indonesia. Although the present scenario is worrisome with GDP touching 4.8% growth in the fourth quarter of the last fiscal, our economy will bounce back soon to catch up with the desired 8% growth by 2015-16. Consequently, we should not have any inhibition to scale up with quality as otherwise persons with less competence and no accountability will strive to occupy the positions that would get generated with the growth of the economy. Further, our profession can contribute in a modest manner to the endeavour of reaping the demographic dividend by producing capable young finance professionals. India has the potential of emerging as the human resource hub for the rest of the world. There are already over 30,000 CAs settled abroad serving different economies. We must continue to produce professionals who are nurtured in India, but groomed for the world.

Knowledge Management and Innovation

The profession today stands on the threshold of dynamism and change. We need to be diligent in knowledge management and innovation. Any laxity on our part could be fatal. The government, the regulators, the society and the clients do expect the profession to take proactive measures for knowledge updating and skill upgradation. Both in the core areas of our practice such as assurance function as well as in the non-core areas such as consultancy/advisory functions, we need to be empowered consistently. Any inaction can create a void which will be filled by those outside our profession. John F Kennedy said that there are risks and costs to action but they are far less than the long range risks of comfortable inaction. We just cannot afford to be indifferent or ignorant of the developments around us. Practising the accountancy profession is like riding a bicycle and one does not fall off unless one stops pedalling. Learning is akin to pedalling. No other factor can inspire more confidence and faith of the stakeholders in our profession than the demonstrative quest for knowledge and competence gained out of it. The profession owes to the stakeholders an assur-ance that its members are the most competent and empowered lot to deliver services with quality. The profession can ill afford to be negligent on this aspect of the accountability.

Quality in service leads to excellence, which is a definite attribute that paves way for growth and development of the profession. However, there are limits to the excellence we can achieve on a narrow base. The profession needs to innovate and re-engineer itself to a new trajectory of divergence and efficiency. The profession needs to evolve new products, new services, new systems procedures and methodologies to maximise utility but minimise the cost. Excellence is like the summit of a pyramid, larger the base higher the summit. We should not spare any endeavour to broaden the base of the quality of our services with skills, standards and values and build the pyramid of excellence, the summit of which is unmatched by that of any other profession.

Capacity Building of Firms

It is common knowledge that Indian entrepreneurs are consolidating their businesses to grow big and face global competition. Multinationals are establishing subsidiaries of large size in India. Takeovers, mergers, amalgamations and collaborations are the order of the day. Professionals should also become conscious of this factor and gear up to restructure their firms, reorient their skills and expand their firm size. When an enterprise or a business group grows and the professional firm rendering service to it does not, the chances of replacement by a bigger firm cannot be ruled out.

On a closer look at the following data relating to the composition of the firms in our profession, it is not difficult to realise that most of them are small and medium practitioners (SMPs). Although there is commendable improvement in the growth and expansion of the firms over the last one decade, still we have a long way to go. To the growing Indian business enterprises, our profession is accountable to assure that our firms would measure up to the size that is required to ably cater to the array of services expected by them.

Independence and sanctity of signature

Unlike a few other professions where the accountability is primarily to the client, in our profession the account-ability extends to various stakeholders. For instance, when a member of the profession is exercising the assurance function in the nature of statutory audit and appends his signature, he is not only accountable to the shareholders who are the owners of the company but also to the investors, depositors, lenders – banks and institutions, regulators, customers and all those who make decisions relying on the authenticity of the financial statements so attested. Expression of independent and qualitative opinion is imperative for securing and fulfilling the accountability aspect of the profession. Attest function is the exclusive domain of our profession. We have been given this recognition on the faith that we will discharge it with utmost care and competence. Considering the fact that audit is not a privilege but a responsibility, it requires to be shouldered carefully by skilled and credible hands. Besides, audit is a time-bound exercise and, therefore, adequate trained manpower, infrastructure and audit tools and manuals are inevitable for a firm to acquit it creditably in discharging such function. Assurance function demands excellence, integrity and independence and when properly discharged commands unshakable faith, respect and image.

If warranted, based on facts and figures, we should have the mettle to express an adverse opinion on the financial statements of the client who ends up paying for such an opinion. Any dereliction in this regard might dilute our significance and exclusivity. When we consciously discharge our duties to meet with the genuine expectations of the stakeholders, our stature and rights get automatically preserved and cherished. Rights which flow from duties not done properly are not worth having.

Adherence to various standards governing the profession; ensuring proper documentation of work done and resorting to expression of opinion without fear or favour leaves no room for a gap in performance. Succumbing to pressure of a branch manager of a bank to complete an audit in undue haste or to classify certain NPAs as good debts may at best please him but undoubtedly erodes the image of the professional even in his mind. Losing sight of the significance of quality in work may result in short term gains to that professional but brings disrepute to the entire profession. If the nation’s interest is upheld and protected while serving a client, it brings greater glory to the profession and the brand image is enhanced by reinforcing stronger faith and instilling greater confidence.

The signature of any professional is an expression of credibility. So is the case with the signature of a member of our profession which is truly trusted and highly respected. The status of the signature of a person becomes elevated and turns out to be a precious one on acquiring professional qualification as a Chartered Accountant. Even if a miniscule section of the society perceives that the signature of a member of our profession is available for the asking or solely for a consideration that would be a dreadful scenario and could lead to erosion of goodwill which our forefathers have so strenuously built over six decades.

Ethical values

Some members of the profession strive and survive on account of the goodwill created by our forefathers. Many members contribute to and enhance such good-will by their exemplary conduct, impeccable integrity and qualitative delivery of services. Unfortunately, the conduct of a few has diminishing effect on the goodwill of the profession. We need to introspect as to which category we should belong to and the answer is obvious. Fee based approach in everything we do would be fatal in the long run whereas value based approach would enhance our reputation. Mahatma Gandhi said that there is enough for every one’s need but not for the greed. The Father of the nation also indicated that ‘ends’ do not justify the ‘means’. It might pay to be unethical in the short run, but in return one loses self-esteem and peace of mind, which is too precious a price one should dread to pay and suffer.

Lord T.B. McCauley said, “the measure of man’s real character is what he would do if he knew he would never be found out”. Everyone aspires to grow and reach greater heights. It will be nice to always bear in mind that ability may take us to the top but it requires character to stay there. Quality in service without compromising on ethical values begets not only prosperity in the long run but undoubtedly helps us to build image and command respect. In matters of innovation and empowerment, one should swim with the current, but in matters of values and principles, one should stand like a rock.

Challenging Environment

With the passage of time, business practices are getting corrupted. Government departments are difficult to deal with when straightforward approach is adhered to. The business philosophy and practices are degenerating in values due to which many frauds and scams are surfacing. There is lack of transparency and accountability in the usage of resources by the governments as well as entrepreneurs. Manipulations and fudging in matters of finance and accounts are resorted to for various reasons and more particularly for evading tax outflows. In such an environment it is a challenge for the accounting profession to discharge the duties upholding standards and values. A profession like ours owes it to the society to possess the courage of conviction and perform our role in the best interest of the economy in order to establish unblemished track record for the posterity to inherit.

The audit reports of C&AG on allocation of spectrum in the telecom sector as well as natural resources such as coal has brought in accolades from the public and created enormous awareness among the masses on the need for good governance and has served as a warning for those involved in the decision making process to be accountable. Many of our members have been instrumental in bringing out frauds and manipulations. The future is going to be tougher in this regard and all the same we need to gear up to face the challenge and ensure that there is no performance gap. No other profession can boast of having as proximate a role and nexus as ours with the economic development of our country. Let us reinvent the significance of our role in partnering, participating and partaking in building a credible economy in the incredible India.

Professional Social Responsibility (PSR)

A member of our profession is considered to belong to the elite segment of the Indian society. About 27% of the Indian population is perceived to be below the poverty line. We owe it to the society to contribute in uplifting the lives of the downtrodden and under privileged masses. The standing and respectability of the profession can touch lofty heights only if the profession is able to positively contribute to the socio-economic development of the society. Several measures can be resorted to as part of PSR initiatives and some of them can be readily spelt out. Firstly, ICAI and professional forums like BCAS can enhance the level of contribution in the policy formulations by various ministries of the Central Government and of the State Governments on socio economic reforms and their effective implementation. Secondly, senior members of the profession and other members with requisite exposure, aptitude and inclination, can plunge into public life in large numbers; accept positions such as trustees of public charitable trusts and institutions, become governing board members of educational, health care institutions and not for profit organisations, assume leadership in chambers of commerce, management and trade associations. Thirdly, every medium and large firm can establish a charitable institution and carry out activities to meet societal needs in a small way.

It is well known that ICAI has a Benevolent Fund for the members of the profession, which goes to the rescue of the distressed, in times of need. Another similar measure was conceptualised as ‘Fund for Education and Welfare of Students’ during 2006-07 but seemed to have been lost sight of down the line.(Please refer page 1186 of February 2007 Journal, The Chartered Accountant). If properly taken up, this fund would assist meritorious but poor students to be financially supported and counselled to pursue and qualify as members of our profession. CA. Prema earned wide acclaim by achieving All India First rank in the November 2012 examination in spite of hailing from a humble background with her father being an auto rickshaw driver in Mumbai. Many such students could be ably supported and made members of our profession. We should reach out to those bright students who might not otherwise take up higher studies and thereby change the profile of their families by the power of our professional qualification. This can be yet another measure worth pondering over to be acted upon as part of the PSR initiative.

Conclusion

As we continue our glorious journey, it’s time that we take stock of the socio-economic changes unfolding around us and adjust the course of our journey accordingly for larger benefit of the society and the nation. We may not have the ability to change the course of the wind but we can set the sail appropriately to proceed in the noble path we choose to progress. French philosopher Jean-Paul Sartre said that we have no destinies other than those we forge ourselves. Let us make the society feel proud of our profession and thereby justify our existence.