1. Disciplinary case :
In the case of ICAI v. Shri Ramesh R. Kapadia,
reported on page 292 of C.A. Journal for August 2008, the complainant (Joint
Director of Industries) alleged that the member had issued the certificates of
consumption of raw materials and production in respect four units of the
enterprise. There was no correlation between the cost of raw materials and the
value of finished goods. It was also alleged that in the certificates, the value
of raw materials was shown as CIF value, whereas this value should be at landed
cost including customs duty. This was not taken into consideration by the member
while reporting the figures of production. It was further alleged that there
were no records with the enterprise and the above certificates were issued
without any verification with the records.
The Disciplinary Committee held that the member was guilty of
professional misconduct under clauses (7) and (8) of Part I of Second Schedule
to the C.A. Act. The ICAI Council accepted this decision and recommended to the
Bombay High Court that the member be reprimanded.
The Bombay High Court has accepted the findings of the
Disciplinary Committee and the ICAI Council and held that the above certificates
were issued by the member without proper care and caution. However, since the
member had admitted his mistake, the High Court held that the member be awarded
the punishment by way of a reprimand.
2. EAC opinion on provision for diminution in value of investments :
The Expert Advisory Committee (EAC) has given an opinion on
the above issue which is reported on page 145 of Volume XXII of the Compendium
of Opinions published by ICAI.
Facts :
A public sector company engaged in the business of refining,
transportation and marketing of petroleum products, acquired shares in another
public sector company at the rate of Rs.1,551 per share as against the book
value of Rs.192.58 per share and market value of Rs.876 per share as on the date
of purchase of shares. The investor company submitted that the above investment
was a strategic investment and the premium of Rs.675 per share was paid
considering the various tangible and intangible benefits such as :
(a) Maintaining the current market share.
(b) Avoidance of erosion of refining volume currently
supplied to acquired company.
(c) Higher refinery throughput.
(d) Significant potential to add value to the existing
retail marketing capabilities.
(e) Higher retail volume, thereby providing stability to
cash flow, as the retail sale is less susceptible to risk as compared to bulk
sale.
(f) Retail margins are relatively insulated as compared to
bulk sales.
(g) Access to positive cash flow and zero debt company —
significant leverage to raise debt.
On the above basis, the investor company took the view that
the shares of the investee company were acquired as a strategic investment and,
therefore, it was not necessary to provide for any diminution in the value of
investment which was a long-term investment.
Opinion of EAC :
EAC has considered the facts of this case and stated in its
opinion that the company had acquired shares of another company for strategic
reasons and it wanted to hold the shares for a long-term period. The Committee,
therefore, took the view that this was a long-term investment. Thereafter, the
Committee has considered para 17 and 32 of AS-13 and observed as under :
“On the basis of the above, the Committee is of the view
that in case of long-term investments only where there is a decline, other
than temporary, in the value of investments, the carrying amount thereof is
reduced to recognise the decline. The Committee is further of the view that to
determine whether there is a decline other than temporary in the value of
investments, an assessment should be made keeping in view of the assets of the
acquired company, its results, the expected cash flows from the investment,
etc. The market value of the shares is not the sole indicator of decline,
other than temporary, in the value of investments.”
While concluding the opinion, the Committee has stated that
the accounting treatment ‘at cost’ under the head ‘Long-term Investments’ in the
financial statements of the above public sector company, without providing for
diminution in the value, is correct and is in accordance with the provisions of
AS-13.
3. MOU with Information Systems Audit and Control Association (ISACA) :
ICAI has entered into an MOU with ISACA, which is the world’s
leading association serving IS Audit professionals. Under this MOU, our members
will be able to freely access and make use of internationally accepted
standards, guidelines and procedures of ISACA. It will not only bring increased
global acceptability of our DISA qualification in carrying out IS Audits, but
also facilitate active participation of our members in further research being
conducted by ISACA for development of IS Audit standards. The Indian corporate
sector will also benefit by having a framework within which IS Audits will be
carried out by the professionals (Refer p. 227-228 of C.A. Journal for August,
2008).
4. Examination results :
C. Girl students:
i) Out of total of 1,45,378 members, 21038 (14.47%) are women members.
ii) Out of 10,580 students who appeared in CA. Final Examination (Both Groups) held in May, 2008 2767 (26%) were girls.
iii) Pass Percentage – Girl students 27.57% – Boy students 24.09%.
iv) Out of the first five positions in c.A. Final, May, 2008 examination, three (2nd, 3rd and 4th) are girls.
(Source: P. 228 of C.A. Journal for August, 2008)
5. Measures for welfare of members and students:
As a part of the Diamond Jubilee Celebrations of the Institute, ICAI has decided as under:
i) Chartered Accountant’s Benevolent Fund (CABF) :
Chartered Accountant’s Benevolent Fund (CABF) will now make the following ex-gratia payments:
a) Rs.1 lac will be given to the legal heirs of a member in case of unnatural/premature death of a member below the age of 45 years.
b) Financial assistance to the tune of Rs.l lac will be given for medical treatment of a member for specified ailments.
c) Rate of monthly assistance given to members or his/her heirs by the above Fund has now been increased from Rs.3000/ 4500 to Rs.4000/ 5500.
ii) Benevolent Fund for CA. Students:
ICAI has decided to set up a Fund similar to CABF for C.A. Students. ICAI will raise a substantial corpus for c.A. Students Benevolent Fund to provide similar benefits for C.A. Students.
(Refer page 228 of CA Journal, August, 2008)
6. ICAI News:
(Note: Page Nos. given below are from CA. Journal for August, 2008)
i) Enhancing Audit Quality:
Some of the observations made by reviewers while conducting peer review are listed on page No. 343 in order to enable the members to improve the quality of audit of corporate bodies.
ii) Guidance Notes:
The following Guidance Notes are issued by ICAI:
(a)Applicability of AS-20 ‘Earning Per Share’.
(b)Remuneration paid to Key Management Personnel- whether a related party transaction (AS-18).
(c)Applicability of AS-25 to Interim Financial Results.
(d) Turnover in case of Contractors – AS-7.
(Referpages374-376)
iii) Exposure Drafts:
a) Exposure Draft of Standard on Auditing (SA) 265 – Communicating Deficiencies in Internal Control and Explanatory Memorandum on the above subject is published on pages 378 to 387.
b) Exposure Draft of Standard on Auditing (SA) 500 (Revised) – Considering the Relevance and Reliability of Audit Evidence and Explanatory Memorandum on the above subject is published on pages 388 to 395.
iv) ICAI Publications:
Technical Guide on Internal Audit in Telecommunications Industry (Page 361).
v) For Students:
All students who have passed PE-II are permitted to appear in the Final Examination, irrespective of whether they have been registered under Final (Old) syllabus or (New) syllabus, provided they have completed practical training or are serving the last 12 months of articled training on the first day of the month in which the Final Examination is scheduled to be held and complied with other eligibility conditions. (Page 332).
Verification fees of answer books of CA. examinations has been revised. This fee will now be Rs.100 per paper, subject to maximum of Rs.400 effective from May, 2008, examination (Page 355).
