Dear Professional Colleagues,
When I wrote my communication for the May issue, we were in the middle of an election. All pollsters predicted a fractured mandate, with all its adverse consequences. Many of us were reconciled to an unstable government and many compromises that government formation would have required. Fortunately the Indian voter turned out to be far wiser than what the experts expected him to be. We have a stable government in place. Though it is still a coalition government the baggage of allies has become far lighter. This may mark a turning point in our national history. There are huge expectations from this government which is headed by a Prime Minister with a clean image.
There is hope that the economy will be back on track. Our profession will have a significant role to play in the upsurge of economic activity. The question that we need to ask ourselves is how far are we equipped to meet the demands society will make on us ? In this communication I have attempted to discuss a few of the challenges that we face.
Our role as book-keepers has diminished considerably. The routine, repetitive work is now taken care of by technology. Armies of accountants have now been replaced by computers driven by intelligent software. However, verification of huge databases is still our responsibility. It is in this area that we face our first major challenge. The new entrants to the profession are techno-savvy but most of the seniors are not. We must harness technology to validate databases. Data security is a subject we must learn. We realise our inadequate knowledge when we have to deal with subjects like information security and system audits. Undoubtedly, a few of us may have acquired the requisite knowledge but many of us have not. The Institute of Chartered Accountants of India (ICAI) already has a subject of this nature in the curriculum and is making efforts to equip existing members. However, far more needs to be done. During the course of our audit we do rely on the work of experts in this area, but our level of comfort will increase only when our members equip themselves with knowledge in these areas.
The second challenge is the area of accounting standards. The ICAI is the standard setter. One certainly understands that with globalisation, the stake-holders in business are spread over different geographical locations and belong to different countries. In order to ensure that we do better business with each other it is necessary that we speak in the same accounting language. In this context convergence to International Financial Reporting Standards (IFRS) is welcome. However, our leaders must appreciate that while large business houses have significant impact on the economy, in absolute terms their numbers are small. The majority of small/medium businesses have a different perspective, culture and the professionals who service them play a different role from those who service large business houses. Consequently the accounting, audit and documentation standards that apply to these entities must be significantly different from the standards that apply to global business. I am conscious that basic accounting standards and principles must be adhered to. The debate is over ‘what is basic ?’. We have seen that advisors, regulators were responsive to the needs of business in the context of the problems large corporates faced given the unforeseen foreign exchange fluctuations that occurred in recent months. The same degree of sympathy and response must be shown to problems of small/medium businesses and their service providers in adhering to accounting and audit standards. If this does not happen, the standards will be observed more in breach and compliance will be in letter and not in spirit.
The third challenge is to change the mindset of professionals that their survival depends on statute-based work. We have seen a debate about the methodology of allotment of audits of banks and public sector undertakings, etc. While one entirely supports transparency in appointment of auditors where public interest is involved, the profession must introspect and see as to how it can add value to the services that it delivers. If regulators begin to feel that the services that we provide are only ‘ticking the boxes’, then the statutory mandate will be done away with. I understand that in the UK, audit of small private limited companies is optional. It is only when auditees perceive a value in our services that they receive, that they would be willing to remunerate us handsomely. Today, statute-based compliance cost is considered as a tax by the payer, it must translate into a fee.
The fourth challenge is adherence to ethical standards. Regulators and other authorities treat our authentication with trust. They expect that we take due degree of care. We must ensure that blatant offenders amongst us are brought to book and action is taken quickly. I entirely appreciate that in some cases our authentication is to be read with certain qualifications due to the inherent limitations of the verification process. The need is to communicate such limitations clearly so that misunderstanding is minimised. We must perform with diligence once we accept assignments. Limiting our effort to make it commensurate to the fee should never enter our minds. Our members must understand the distinction between a profession and a business and the line that divides the two.
The last challenge is to remain relevant to the society at large. It is a fact that despite all the ills that affect it, the medical profession is respected because it touches the lives of all, of the richest person in a mansion and of the man on the street. Our profession must also consider how it can make available its skill sets to society at large. We must look at environmental audits, energy audits and may be even social responsibility audits. It is only then that the trust and confidence that the public places in the letters ‘CA’ of the English alphabet will be reinforced.
