When this issue reaches the hands of readers, most of my professional colleagues would have completed one of the most onerous tasks of the year, that is of issuing a tax audit report. Every year, a month before the due date, there is a clamour for an extension and this year was no different. It is true that for this year, the problem was compounded by the government requiring the tax audit report to be uploaded in electronic format and an increment in the details to be furnished in the income tax return. An extension for uploading the tax audit form has been granted, but my colleagues term the concession as inadequate. This is for the reason that in a majority of the cases, the compiling of the data that is required for income tax return as well as the tax audit report has always been treated by the client /auditee as the responsibility of the tax auditor.
The problems created and the tension that my professional colleagues face is primarily on account of the fact that the division of roles and responsibilities between the client and auditor have not been understood and appreciated by both. Clients have always taken the view that compliance is the responsibility of the auditor. This attitude is prevalent amongst the small entities to large multinationals, with only the degree varying. Apart from clients, lawmakers and regulators have also started shifting the onus of verification of compliance with the provisions to Chartered Accountants. The profession has welcomed these moves as professional opportunities. The fact that this entails an additional responsibility is lost sight of. The role and responsibility of the client in this compliance process is also not emphasised and he is not educated about this aspect. Over the years, Chartered Accountants have accepted this position, without appreciating whether they are equipped to perform the tasks that they would be required to, and whether the remuneration is commensurate.
To appreciate the actual problem faced by professionals, one must understand the overall scene. As explained in the earlier paragraphs, the responsibilities on the auditor are continuously increasing. To illustrate, the Income-tax Act alone has 46 provisions which require either an audit or certification by a Chartered Accountant. The Companies Act and State laws would add to this list. In fact, the responsibilities the Companies Act, 2013, imposes on an auditor are so onerous that senior professionals believe that new entrants to the profession would be discouraged from joining it. These are the challenges at the micro level.
At the macro level, one wonders if this is going to be the scenario for Chartered Accountants, in practice, is there an adequate number of Chartered Accountants available and have they been suitably equipped. In the year 2000, the number of Chartered Accountants in the country was 92,960 and those holding certificates, numbered 65,843 constituting 71% of the total membership. In the year 2013 the figure stands at 2,17,119 with certificate of practice being held by 103,636 persons, constituting 48% of the membership. Clearly, the number of persons joining the auditing profession which is expected to carry out these tasks has dwindled. As a consequence, younger professionals who are better equipped to handle issues requiring use of technology and newer skill-sets are not entering professional practice. On the one hand, increasing demands are being made on the profession, while the number of those with the wherewithal to satisfy these demands is reducing. There is a substantial gap between demand for good professionals and their availability. This leads to entrusting the responsibility to those who are unable to discharge it. The result is a widening expectation gap and dissatisfaction and disillusionment on both sides. What then is the solution?
Clearly, no other profession is better equipped to handle these responsibilities. Given this situation, three things need to be done. Firstly, users of services, whether they be auditees, tax authorities, regulators or the public have to appreciate the scope and limitations of the responsibilities of the professional. This aspect of the matter has to be dealt with on a war footing, and the Institute of Chartered Accountants of India (ICAI) must carry out a continuous campaign in this regard. Secondly, lawmakers and regulators have to interact with professionals before they suggest changes in laws and regulations which require furnishing of a plethora of details by taxpayers which are required to be certified/authenticated by Chartered Accountants. There is no point in collecting a huge database when one does not have the ability to digest and utilise the existing data.
Finally, and not in the least, professionals have to continuously upgrade their skills. Many of my senior colleagues would do well to remember that, while the experience that they have acquired over the years is undoubtedly invaluable, it cannot be a substitute for new knowledge and skills. The world is changing quickly and if we do not act it will drive past us.
Apart from this, the profession must interact with clients, and apprise them of their role and responsibility. We must learn to say `no’ whenever it is necessary. If we do not do this immediately, the primacy of the ICAI, an institution which is more than six decades old, will be lost. As a corollary, the respect that the profession enjoys in society will gradually evaporate. There is an erroneous perception that the existing apparatus is unable to meet the expectations. The provisions of the Companies Act, 2013, empowering the Central Government to prescribe accounting standards, and the constitution of the Financial Reporting Authority, which will oversee audit performance, are examples of this perception. Those concerned must take note of these developments. The writing is on the wall. I only hope that the leaders of our profession have the foresight and the fortitude to read it!
Anil J. Sathe
Editor
