ICAI and its Members
1.
Companies Bill, 2009 — Accounts and Audit :
Companies Bill, 2009, was
introduced in the Parliament on 3-8-2009. It was referred to the Standing
Committee for Finance on 9-9-2009. The Report of the Finance Committee dated
26-8-2010 was presented to the Parliament on 31-8-2010. Based on this report the
Companies Bill is being modified by the Ministry of Corporate Affairs. The
modified Bill is likely to be discussed and adopted by the Parliament in the
Budget Session in February-May 2011. Some important changes, relating to
accounts and audit, as suggested by this Committee, are as under.
(i) Clause 117(3) of the
Bill provides that the accounts of subsidiary companies should be consolidated
in cases of all companies. The committee has suggested that unlisted companies
be exempted from this requirement.
(ii) Clause 118 of the Bill
provides that the Central Government shall constitute ‘National Advisory
Committee on Accounting and Auditing Standards’ (NACAAS) to advise the
Government on accounting and auditing polices and standards for adoption. The
committee has welcomed this provision and observed that NACAAS should be
institutionalised not only as a body for setting up auditing standards, but also
as a quasi-regulatory body for generally supervising the quality of audit
undertaken. Under clause 126(10), the Central Govt. has been given authority to
notify the auditing standards in consultation with NACAAS and the auditors will
have to comply with these standards. This provision, if implemented, will
restrict the authority of ICAI to issue the auditing standards.
(iii) The committee has
suggested that a new clause be added in the Bill to provide for appointment of a
Chartered Accountant or a Cost Accountant for conducting Internal Audit of the
books of accounts of specified classes of companies. The Government should
prescribe the Rules about the manner in which Internal Audit should be conducted
and reported.
(a) An individual Chartered Accountant or a firm of Chartered Accountants shall be appointed as auditor for not more than five consecutive years.
(b) An Individual auditor who has completed a five year term, shall not be reappointed as auditor for the next three years in that company.
(c) A firm of auditors who has completed a five years’ term, shall not be reappointed as auditor in the same company for the next five years.
(d) In the case of the firm, being auditor of a company, the auditing partner should be rotated every three years. The auditing partner rotated, as above, shall not be eligible to be the auditing partner for audit of the same company for the next three years.
(e) NACAAS should be entrusted to develop and prepare a comprehensive list of audit firms over a period of three years. Once this list is ready, it will be mandatory for any company to appoint an auditor from this list only. During this interim period, companies can appoint their auditors on their own.
(v) The Audit Committee has
to ensure and monitor that the independence criteria has been fulfilled by the
auditor of the company throughout the year.
(vi) The auditor who has
resigned or is proposed to be removed before the expiry of his term will have to
file with the company and the ROC the prescribed form giving reasons and other
relevant facts. The matter about resignation or removal of the auditor, with
reasons recorded by him, will have to be first considered by the Audit
Committee. The Board of Directors shall consider the recommendation of the Audit
Committee, and thereafter, with the approval of the General Meeting accept the
resignation of the auditor and appoint another auditor. In case of removal of
auditor, before expiry of his term, special resolution of General Meeting will
be required.
(vii) Clause 125 of the Bill
provides for remuneration of Auditors. It is suggested by the committee that the
notice for the General Meeting shall give justification for payment of the
amount of remuneration proposed. Further, the shareholders, while approving the
remuneration of Auditors, will have to take into consideration the net worth and
turnover of the company. If this suggestion is implemented, the present practice
in some companies to provide in the resolution that the audit fees payable to
Auditors will be fixed by the Board of Directors will have to be discontinued.
(viii) Clause 127 of the
Bill provides that a statutory Auditor of the company shall not render any other
services viz. (i) Accounting, cost accounting and book keeping, (ii) Internal
Audit, (iii) Design and implementation of any financial and cost information
system, (iv) Acturial services, (v) Investment advisory services, (vi)
Investment banking services, (vii) Rendering of outsourced financial services
and (viii) Management services. As regards other services, relating to tax
audit, tax representation, tax advisory services, etc. approval of Board of
Directors or Audit Committee will be required. The committee has suggested that
the statutory auditor of holding company also should not render the above
services listed in Clause 127 to a subsidiary company.
(ix) The committee has
suggested that Secretarial audit report should be attached to the financial
statements by companies exceeding certain threshold limit of paid-up share
capital.
(x) Clause 130 of the Bill,
after suggestion of the committee, provides for the following punishment for
contravention of certain provisions by the Auditors :
(a) If the auditor contravenes the provisions of Clauses 126, 127 and 128 dealing with powers and duties of auditors and compliance with auditing standards, rendering other services and signing of audit report, he shall be punishable with imprisonment for a term up to one year and with fine ranging from Rs.50,000 to Rs.25 lacs or with both.
(b) On conviction as above, the auditor will be liable to refund the remuneration received by him to the company and also pay damages for loss arising out of incorrect or misleading statements in the audit report.
(c) In the case of audit by a firm, if it is proved that the audit partner or partners have acted in a fraudulent manner or abetted or colluded in any fraud by, or in relation to, or by, the company or its directors or officers, the civil or criminal liability in any law shall be of the audit partner or partners as well as the firm jointly and severally.
(xi) As regards cost audit, the committee has suggested that Clause 131 of the Bill should be suitably amended and a Cost Auditor should be appointed by the shareholders at the AGM in the same manner as statutory auditors.
Some of the above suggestions of the committee, if accepted by the Government and enacted by the Parliament, will have far-reaching consequences on the practising members of our profession. Some of the provisions undermine the autonomy of our Institute granted to us six decades ago. It is surprising that no serious protest has been made by our Institute or the elected representatives in the Council. No public debate has been generated and our members are not aware about the implications of these far-reaching changes likely to be made in the company law in the next year.
2. Special Loan Scheme of Corporation Bank for our Members:
The Committee for Capacity Building of CA Firms and Small & Medium Practitioners, ICAI, has taken a major initiative to arrange financial assistance to all members in practice/firms in the form of specially designed loan scheme through Corporation Bank. Under this scheme, eligible Chartered Accountants can avail finance for setting up offices, including cost of furniture/ fixture/office equipments — computers and other accessories. The scheme would also enable Chartered Accountants to finance a part of working capital for building their profession and would also take care of the needs of fresher (CAs with experience below three years).
Members and firms are requested to avail the benefits of this loan scheme. For further details, please contact the nearest branch of Corporation Bank.
3. Special programme through video conferencing mode:
The Committee for Members in industry of the Institute of Chartered Accountants of India provides opportunity to employers to interact with newly qualified Chartered Accountants providing a cost effective mode of recruiting newly qualified Chartered Accountants.
Special placement programme is a step ahead as an extension to the same programme, but with a different objective. For the first time, CMII has taken an initiative to organise a separate special placement programme through video conferencing mode for Chartered Accountants for getting placed, not only within the country, but also for taking up jobs abroad. Many CAs are providing their services to organisations in Gulf Council Countries/Middle East. To facilitate employment of Chartered Accountants in the GCC/Middle East, CMII of ICAI is organising a special placement programme.
This programme would enable corporates working in Gulf Council countries (GCC)/Middle East to recruit Chartered Accountants through video conferencing mode from Chennai, Kolkata, Mumbai and New Delhi centres. (Refer P. 807 of C.A. Journal for November, 2010).
4. Online Articles Placement Portal:
The Board of Studies has introduced an optional campus placement scheme for selection of Articled Assistants by CA firms. The pilot campus placement programme was held in Delhi in August 2010 for the CA firms having their HOs/Branch Offices in Delhi/New Delhi and for eligible students who would like to service their articles in CA firms in Delhi/ New Delhi. Considering the good response, positive feedback and requests received from both CA firms and students, it has been decided to start an Online Articles Placement Portal — http://bosapp.icai. org from 5th October, 2010 to facilitate placement of Articles in CA firms on an all-India basis. Eligible candidates and CA firms can avail of this facility and register themselves online through the portal. The candidates shortlisted by CA firms would be informed by email through the portal, to appear for interviews/interactions at their respective offices, on the designated date and time. (Refer P. 690 of C.A. Journal for November, 2010).
