By P. N. Shah, H. N. Motiwalla, Chartered Accountants
ICAI and Its Members
1. Disciplinary case :
In the case of ICAI v. Vijay R. Ashar, reported on P.
1006 of C.A. Journal for December, 2008, it was reported to the Institute that
the member had audited the accounts of a company in which the wife of the member
had substantial interest (holding more than 20% equity shares). It was also
reported that the member did not disclose the nature of his wife’s interest in
his audit reports given to the company for all the six years for which this
complaint was filed with ICAI. It was alleged that by not disclosing his
interest, the member had violated the guidelines issued by ICAI.
The Disciplinary Committee, after hearing the parties and
examining the evidence, held that the member had violated Clause (4) of Part I
of Second Schedule to the C.A. Act and, therefore, he was guilty under that
clause. The Council of ICAI accepted this finding and referred the matter to the
Bombay High Court with a recommendation that the member be reprimanded.
The High Court has held as under :
That Code of Conduct for the chartered accountants framed
by the Institute of Chartered Accountants of India provides that where the
partner or relative of the member as a director in the company holds
substantial interest, the member may desist from undertaking audit of the
financial statements and/or expression of opinion and if the member feels that
his independence is not affected and undertakes the audit of such company, he
should disclose such interest in his report while expressing his opinion on
the financial statement of such company. The explanation of the member before
the Disciplinary Committee was that he was ignorant of the said guidelines.
The Court was of the view that the explanation put forth by the member was
hardly acceptable. It could not be believed that as a professional chartered
accountant in practice, he was not aware of the guidelines and the Code of
Conduct framed by the ICAI.
The High Court, accordingly, concurred with the finding
recorded by the Disciplinary Committee and accepted by the Council, that the
member had violated Clause (4) of Part I of the Second Schedule of the Act.
Accordingly, the Court held that the recommendation of the Council that the
member be reprimanded is reasonable and rather lenient.
It may be noted that in Clause (4) of Part I of the Second
Schedule as amended by the Chartered Accountants (Amendment) Act, 2006, w.e.f.
17-11-2006, it is provided that a member cannot express his opinion on financial
statements of any business or enterprise in which he, his firm, or a partner in
his firm has a substantial interest. In other words, a member or his firm cannot
accept audit assignment of a company in which he or his partner or his relative
has substantial interest.
2. MOU between ICAI and ICAEW :
ICAI has signed an MOU with the Institute of Chartered
Accountants in England and Wales (ICAEW) on 20-11-2008 at Jaipur. In brief, the
MOU provides as under.
(i) Existing members of ICAI, in good standing and with two
years post-qualification experience (availing credit of prior learning) will be
eligible for ICAEW membership on passing of only one paper of ICAEW on Case
Study. The ICAI members with less than two years’ experience ( not availing
credit for prior learning) will be required to appear for additional papers in
Business Reporting (T1) and Business Change (T2) along with Case Study. They
will also be required to pursue the structure training in ethics. There is no
additional requirement of undergoing any additional training experience
requirements or take any other examinations.
(ii) Existing members of ICAEW who are trained in public
practice will be become eligible for ICAI membership, subject to passing ICAI’s
examination papers for the special modules of Auditing & Assurance; Law, Ethics
& Communication; Information Technology & Strategic Management; and Taxation.
(For further details refer P. 955-956 of C.A. Journal for
December, 2008)
3. CPE Credit requirements for 3 years’ rolling period 2008-2010 :
Members may note the CPE Credit Requirements for three years’
rolling period 2008-2010, which are as under :
(i) For members holding certificate of practice (excluding
members residing abroad), unless exempted,
— 60 CPE credit hours (Minimum 20 credit hours each year)
of structured learning during 2008- 2010.
— 30 CPE credit hours of structured/unstructured learning
during 2008-2010.
— For members above 60 years of age, the CPE credit hours
of structured/unstructured learning required is of 70 credit hours (Minimum 10
credit hours in 2008 and 20 credit hours in each year thereafter) during
2008-2010.
(ii) For members not holding certificate of practice and all
members residing abroad, 45 CPE credit hours (Minimum of 10 credit hours each
year) of structured or unstructured learning during 2008-2010. For members above
60 years of age, this period is 35 credit hours during 2008-2010 (Minimum 5 in
2008 and 10 in each year thereafter).
(Refer Page 1057 of C.A. Journal, December 2008)
Note : It is reported that during the period
1-1-2008—10-11-2008 ICAI, its Regional Councils, Branches, Study Circles, etc.
have generated about 7,65,000 CPE credit hours. Out of about 70000 members
(excluding senior members and members residing abroad) holding C.P., about 14000
members have completed the minimum requirement for CPE credit hours. Details
about CPE credit hours of each member can be obtained through CPE Portal,
www.cpeicai.org .
4. Accounting and Auditing Standards :
(Note : Page Nos. given below are from C.A. Journal
for December, 2008)
(i) The following Accounting Standards are published :
(a) Accounting Standard for Local Bodies (ASLB)
– ASLB-3 ‘Revenue From Exchange Transactions’
This Standard deals with revenue recognition on sale of goods, rendering of services yielding revenue and use by others of entity assets yielding interest, royalties and dividends (Pages 1072- 1079).
– ASLB-4 ‘Borrowing Costs’
This Standard deals with Borrowing Costs i.e., interest and other costs incurred by an entity in connection with the borrowing of funds (Pages 1080-1084).
ii) The following Revised Auditing Standards are published:
a) Revised Standard on Auditing (SA) 250 ‘Consideration of Laws and Regulations in an Audit of Financial Statements’ (Pages 1085-1090).
b) Revised Standard on Auditing (SA) 260 ‘Communication with Those Charged with Governance’ (Pages 1091-1100).
c) Revised Standard on Auditing (SA) 570 ‘Going Concern’ (Pages 1101-1107).
iii) Standard on Internal Audit (SIA) 8 on ‘Terms of Internal Audit Engagement’ has been published on Pages 1108-1109.
iv) The following Exposure Drafts are published for comments by members by 12-1-2009:
a) Standard on Internal Audit (SIA) – ‘Enterprise Risk Management’ (Pages 1110-1111).
b) Standard on Internal Audit (SIA) – ‘Internal Control Evaluation’ (Pages 1112-1116).
5) Engagement by students in business or other occupation:
An articled/ audit assistant (student) cannot engage himself or herself in any business or other occupation without the previous approval of the Council of ICAI. He/she has to apply in Form No. 112 duly recommended by the principal with whom articled/ audit service is registered. This permission is normally granted by the Council in the following cases if the conditions stated on pages 1058-1059 of CA. Journal for December, 2008 are satisfied.
(i) Teaching:
This engagement should be before or after the office hours. Further, it should be in the same city or town. The number of hours for the teaching assignment should not exceed the prescribed hours.
(ii) For Directorship:
The directorship should be in a company in which the family of the student has majority interest. The company should be in existence before the articled/audit service started. The principal or the firm in which the student is working as articled/ audit assistant should not be the auditor of the company. The student should not be actively engaged in the business of the company and should not receive any remuneration other than director’s meeting fees.
(iii) Sleeping Partner:
The student can be a sleeping partner in the family concern. Strict conditions are laid down for granting this permission.
(iv) Additional vacancies for Articled Assistants:
This is granted by the Council under Regulation 57 for the reasons stated on page 1059 and on compliance of certain conditions stated therein.
6. Campus Placement Programme:
ICAI organised this programme during August – September, 2008 at 16 cities for those candidates who qualified in May, 2008, examination. In all, 3817 candidates had the opportunity to avail this service. The interviews were conducted by 149 Interview Boards representing 77 organisations. The following figures will indicate the importance of this exercise which is undertaken by ICAI twice in a year (Refer Page 1040 of CA. Journal for December, 2008).
i) Range of annual salary packages offered and number of candidates selected:
7. ICAI News
(Note: Page Nos. given below are from CA. Journal for December, 2008)
i) Enhancing Audit Quality:
Some observations made by the Financial Reporting Review Board are listed in order to enable members to improve the quality of audit of corporate bodies. These observations relate to major non-compliances relating to
a) AS-2 ‘Valuation of Inventories’,
b) AS-3 ‘Cash Flow Statements’,
c) AS-5 ‘Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies’,
d) AS-9 ‘Revenue Recognition’ and
e) AS-13 ‘Accounting for Investments’ (Page 1033).
ii) Revised Resolution under Regulation 190A of CA. Regulations:
ICAI Council has passed a Resolution under Regulation 190A specifying the activities in which a practising CA. can engage either with the specific permission or without the permission of the Council. This Resolution is published as Appendix No. (9) of CA. Regulations. The following modifications are made in the Resolution w.e.f. 9-8-2008 (Refer Page 1054):
(i) No specific permission is now required for holding “Interest in agricultural land and allied activities carried on with the help, if required, of hired labour”.
(ii) General permission is now granted for the following activity.
“Owning agricultural land and carrying on agricultural activity.”
(iii) Empanelment of CA. Firms with C&AG for 2009-10 :
Applications can be made online by CA. Firms to C&AG for Empanelment for appointment as auditors of Government Companies/Corporations for the year 2009-10. The format of application along with detailed instructions will be available on the web site ‘www.cag.gov.in’ from 1-1-2009 to 16-2-2009. The last date for receipt of specified documents by C&AG is 27-2-2009. (Refer Page 1057)
iv) Forensic Accounting:
A certificate course for CAs on ‘Forensic Accounting and Fraud Detection’ is being started by ICAI. (Page 949)
v) lFAC Board:
Shri Ved Jain, our President, has been appointed as member on the Board of International Federation of Accountants (IFAC) for a term of 3 years w.e.f. 13-11-2008.Our best wishes to him for a successful term of office. (Page 952)
(vi) New Publications by lCAl (Page 1055) :
(a) Principles and Practice of Life Insurance
(b) Principles and Practice of General Insurance
(c) Risk Management and Reinsurance
(d) Business Strategic Planning and Information Technology for Insurance Sector
(e) Code of Ethics
