ICAI And Its Members

1. ICAI News :

(Note : Page
Nos. given below are from C.A. Journal for April, 2010)

(i) The Council
of ICAI has constituted four new groups to make the Institute more responsive,
progressive, robust and member/student-friendly. These groups are as under.

(a) The
Central Grievance Redressal Cell :

This cell will
mainly work to effectively and speedily resolve the grievances received from
members and students across the nation centrally.

(b) Codification
of Regulations, Directions of Council regarding functions of Branches of
Regional Councils Group :

This group will
study and examine the provisions of existing regulations, directions of the
Council regarding the functions of Regional Councils or their Branches and
various decisions of the Council/the Executive Committee in place and suggest
suitable changes therein, so as to make such provisions more effective and
members/students-friendly and improve overall functioning of the Branches,
including the aspect of staff and technology requirements.

(c) The
Infrastructure Acceleration Group :

This group will
mainly prioritise various infrastructure projects of ICAI and study, consider
and suggest ways and means of accelerating the ongoing projects besides
ensuring efficient management and maintenance of ICAI properties.

(d) The
Information Technology Initiatives Group :

This group will
see to it that the Institute becomes more hi-tech to the ultimate benefit of
its members and students. (Refer pages 1564-1565)

(ii) Campus
Placement Programme

February-March
2010 :

The first phase
of the interview process for new members of ICAI under the above programme has
been held in February-March, 2010 in 16 major cities. 94 companies participated
in this programme seeking placement for more than 1600 Chartered Accountants.
2906 candidates registered for the above campus interviews. In the first phase,
1032 candidates have been offered jobs. It is reported that this year’s
response far exceeded the response in 2009. It is interesting to know about
some details given on pages 1691-1692 of jobs offered by various companies.

(i) Remuneration
offered :

(a) International
posting :

(b) Domestic
posting :

    Summary of job offers and acceptance at selected places?:

 Some ethical issues :

The Ethical Standards Board has considered some ethical issues and given its views on page 1572. Some of these issues are as under :

    i) Can a practising Chartered Accountant accept a position as auditor previously held by some other Chartered Accountant in such conditions as to constitute undercutting ?

Ans. : A Chartered Accountant in practice can accept a position as auditor previously held by some other Chartered Accountant in such conditions as to constitute undercutting (vide amendment in the CA Act in 2006).

    ii) Whether a member of the Institute will be guilty of professional misconduct, if he, not being a fellow, styles himself as a fellow ?

Ans. : As per Clause (1) of Part III of the First Schedule to the CA Act, a member of the Institute, whether in practice or not, shall be deemed to be guilty of professional misconduct if he, not being a fellow, styles himself as a fellow.

    iii) Can a Chartered Account in practice disclose information acquired in the course of his professional engagement ?

Ans. : As per Clause (1) of Part I of Second Schedule to the CA Act, a Chartered Accountant in practice shall be deemed to be guilty of professional misconduct, if he discloses information acquired in the course of his professional engagement to any person other than his client so engaging him, without the consent of his client or otherwise than as required by any law for the time being in force.

    iv) Whether an auditor is required to provide the client or other auditor of the same enterprise access to his audit working papers ?

Ans. : Working papers are the property of an auditor. An auditor is not required to provide the client ac-cess to his audit working papers. The main auditors of an enterprise do not have right to access to the audit working papers of the branch auditors, except in case it is required by the regulatory norms.

    v) Whether a joint auditor will be responsible for the work done by other joint auditor ?

Ans. : Council direction under Clause (2) of Part I of the Second Schedule to the CA Act prescribes that in respect of audit work divided among the joint auditors, each joint auditor is responsible only for the work allocated to him, whether or not he has prepared a separate report on the work performed by him. However, on the other hand, all the joint auditors are jointly and severally responsible for the work which is not interse divided among the auditors, and also for compliance of requirements of relevant statues.

    vi) Can a member in practice express his opinion on financial statements of any business or enterprises in which he, his firm or a partner in his firm has a substantial interest ?

Ans. : As per Clause (4) of Part I of the Second Schedule to the CA Act. A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct, if he expresses his opinion on financial statements of any business or any enterprise in which he, his firm or a partner in his firm has substantial interest. (Vide amendment in the CA Act in 2006, even after disclosure of interest by the member, expression of opinion is not allowed.)

(For this purpose, ‘Substantial Interest’ means 20% or more interest held by the member or his relatives in the concern. (Refer Appendix-9 of CA Regulations)

    vii) Whether a member in practice will be held liable for failing to keep moneys of his client in a separate banking account or to use such moneys for purposes other than they are intended for ?
Ans. : As per Clause (10) of Part I of Second Schedule to the CA Act, a member in practice shall be deemed to be guilty of professional misconduct, if he fails to keep moneys of his client other than fees or re-muneration or money meant to be expended in a separate banking account or uses such moneys for purposes other than they are intended for.

    viii) Whether a statutory auditor can accept the system audit of the same entity ?

Ans. : The statutory auditor can accept the assignment of a system audit of the same entity, provided it did not involve any scrutiny/review of financial data and information.

    3. Disclosure in Cash Flow Statement of Borrowings, etc. in the case of a financial institution :

    i) Facts :
A company is recognised as a Financial Institution. The company is engaged in financing of power sec-tor in India. The company prepares its Cash Flow Statement using the indirect method as per AS–3 dealing with ‘Cash Flow Statements’. While preparing financial statements, the company disclosed the net cash outflows/inflows from loan disbursements made to/principal repayments received from the borrowers under the head ‘cash flow from financing activities’. The company also disclosed the net in-flows/outflows from loans borrowed from/principal repayments made to lenders under the head ‘cash flow from financing activities’.

The auditors of the company objected to this presentation. They were of the view that the above amount should be shown under ‘cash flow from operating activities’. The company is of the view that AS-3 defines the operating activities as “the principal revenue-producing activities of the enterprise and other activities that are not investing or financing activities”.

    ii) Query :
The company sought opinion of Expert Advisory Committee (EAC) on the following issues :

    a) Whether it is correct to classify the amounts of loans disbursed to and the repayments received from the borrowers under the head ‘cash flows from operating activities’, and the amounts of loans raised from and the repayments made to the lenders under the head ‘cash flows from financing activities’, as per the indirect method of preparation of cash flow statement as per AS-3.

    ii) If not, what is the correct method of disclosure of the amounts of loans disbursed to and the repayments received from the borrowers, and the loans raised from and the repayments made to the lenders, as per the indirect method of preparation of cash flow statement as per AS-3.

    iii) EAC opinion :
While giving this opinion EAC has considered paras 5, 14, 17 and 20 of AS-3 and given its opinion as under :

    a) It is correct to classify the amounts of loans raised from and the repayments made to the lenders under the head ‘cash flows from financing activities’ and the amounts of loans disbursed to and the repayments received from the borrowers under the head ‘cash flows from operating activities’, as per the indirect method of preparation of cash flow statement as per AS-3. For the purpose of the preparation of cash flow statement, the aforesaid amounts would be arrived as increased/decrease in the borrowings and loans & advances outstanding in the two balance sheets relevant for the Cash Flow Statement.

    b) Since the answer to (a) above is not in the negative, this question does not arise.

    Accounting Standards :
Accounting Standards Board (ASB) has issued expo-sure drafts revising the following accounting standards and also issued some exposure drafts of new accounting standards after convergence with Inter-national Financial Reporting Standards (IFRS) for public comments.

    Revised Standards :
    i) AS-4 (Corresponding to IAS-10) — Events after Reporting Period.
    ii) AS-5 (Corresponding to IAS-8) — Accounting Policies, Changes in Accounting Estimates and Errors.

    iii) AS-7 ( Corresponding to IAS-11) — Construction Contracts.
    iv) AS-10 (Corresponding to IAS-16) — Property, Plant and Equipment.
    v) AS-11 (Corresponding to IAS-21) — The Effects
    vi) AS-19 (Corresponding to IAS-17) — Leases.
    vii) AS-21 (Corresponding to IAS-27) — Consolidated and Separate Financial Statements.
    viii) AS-23 (Corresponding to IAS-28) — Investments in Associates.

    ix) AS-25 (Corresponding to IAS-34) — Interim Financial Reporting.

    New Standards :
    x) AS-34 (Corresponding to IAS-29) — Financial Reporting in Hyper Inflationary Economies.
    xi) AS-35 (Corresponding to IFRS-6) — Exploration for Evaluation of Mineral Resources.
    xii) AS-37 (Corresponding to IAS-40) — Investment Property.

    5. Auditing Standards :
The following Standards on Auditing (SA) have been finalised and published at pages stated below. This will apply to Financial Statements for periods begin-ning on or after 1st April, 2011 :

    i) SA-710 (Revised) — Comparative Information — Corresponding Figures and Comparative Financial Statements. (pages 1693-1698)
    ii) SA-800 — Special Considerations — Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks. (pages 1699-1702)
    iii) SA-805 — Special Considerations — Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement. (pages 1703-1708)
    iv) SA-810 — Engagements to Report on Summary Financial Statements. (pages 1709-1716)