By P. N. Shah, H. N. Motiwalla, Chartered Accountants
ICAI and Its Members
1. Disciplinary case :
In the case of ICAI v. Shri Raj Kumar N. Iyer, the
member had given tax audit report u/s.44AB of the Income-tax Act to his client.
The said audit report was not accompanied by the Balance Sheet, and Profit &
Loss Account as annexure to Form 3CD. During the course of
a survey u/s.133A, a few days after the said report was filed with the AO, it
was found that the assessee had no books of accounts. When the statement of the
member was recorded by the AO, he admitted that the assessee did not maintain
proper books of account as mentioned in the tax audit report. The member also
stated that no books of accounts were generated through the computer and,
therefore, he stated that (i) it was not possible to furnish Trading and Profit
& Loss Account and Balance Sheet, (ii) the opinion given in Form 3CB that the
accounts give true and fair view of the financial statements was not correct,
and (iii) the audit report should be treated as incorrect.
On these facts, the Assessing Officer complained to the
Institute that the member had given a false audit certificate in Form 3CB and
3CD and, therefore, he was guilty of professional and/or other misconduct.
In the disciplinary proceedings, the member pleaded guilty
under Regulation 15(2) of the C.A. Regulations. Therefore, he was held to be
guilty of professional misconduct under Clause (8) of Part I of the Second
Schedule. The Council referred the matter to Bombay High Court with a
recommendation to reprimand the member.
At the time of hearing, the member did not attend before the
High Court. However, the High Court has taken the view that since the member has
admitted the guilt, he deserves a lenient punishment. On this basis the High
Court accepted the recommendation of the Council and ordered that the member be
reprimanded. (C.A. Journal for February, 2009 — Page 1377).
2. New office bearers of the Council :
The Council of ICAI has elected new office bearers for
2009-10 on 5-2-2009. 4 Standing Committees and 36 Non-standing Committees are
also elected as under :
(i) Shri Uttam Prakash Agarwal from Mumbai is elected as
President. Our greetings and best wishes to him for a successful term of
office.
(ii) Shri Amarjit Chopra from New Delhi is elected as
Vice-President. Our greetings and best wishes to him for a successful term of
office.
(iii) Executive Committee — President, Vice-President, C.A.
V. C. James, Abhijit Bundopadhyay, K. P. Khandelwal and V. K. Garg.
(iv) Examination Committee — President, Vice-President,
C.A. R. S. Adukia, Preeti P. Mahatme, J. Venkateswarlu, Manoj Fadnis and Shri
K. R. Maheshwari.
(v) Disciplinary Committee (Old Cases) — President,
Vice-President, C.A. G. Ramaswamy, K. K. Gupta and Shri O. P. Vaish.
(vi) Disciplinary Committee (New Cases) — President, C.A.
S. Santhanakrishnan, Anuj Goyal, Shri R. K. Handoo and Shri M. P. Lohia.
(vii) Board of Discipline (New Cases) — President, C.A. K.
P. Khandelwal and Shri S. K. Nayak.
(viii) Chairmen of some of the Other Committees :
3. The Companies Bill, 2008 :
The Companies Bill, 2008 has been introduced in the Lok Sabha
on 23-10-2008 to replace the existing Companies Act, 1956. There is no proposal
about rotation of statutory auditors in the Bill. However, some of the
provisions are proposed to ensure that the independence of statutory auditors is
not impaired. In brief, these provisions are as under :
- Special Resolution will be required if an auditor, other than the retiring auditor, is proposed to be appointed.
- An auditor who has direct financial interest in the company or who receives any loans or guarantee from the company or who has any business relationship (other than as an auditor) with the company cannot be appointed as auditor.
- A person whose relative is in employment of the company as a director or key managerial personnel cannot be appointed as auditor.
- If a firm is appointed as auditors, only a partner of the firm, as authorised by the firm, can sign the audit report on behalf of the firm.
- An auditor cannot accept any other assignment from the company like accounting, book keeping, internal audit, design and implementation of any financial information system, actuarial services, investment advisory services, investment banking services, financial services and management services.
- Audit report shall state whether the financial statements comply with the accounting standards and auditing standards. It may be noted that the National Advisory Committee appointed by the Government will now be required to advise the Government about accounting standards as well as auditing standards. In other words, the auditors will have to comply with auditing standards laid down by the Government on the advice of the National Advisory Committee.
- Auditor shall have a right to attend every annual general meeting and shall have a right to be heard at such meeting on any part of the business conducted at the meeting.
- If the auditor makes default in complying with the provisions relating to reporting on the financial statements, provisions prohibiting rendering of other services, and allowing any person other than an authorised person to sign audit report, he shall be liable to pay fine of Rs.25,000, which may extend to Rs.5 lacs. If it is found that the auditor has knowingly or willfully contravened any of the above provisions, he shall be punishable with imprisonment for a term up to one year or with fine of Rs.1 lac, which may extend to Rs.25 lacs or with both. It is also provided that in such cases, the auditor will have to refund the fees and also pay for damages to the company or to any other persons for loss arising out of incorrect or misleading statements of particulars made in the audit report.
From the above provisions proposed in the Companies Bill, 2008, it will be noticed that these provisions are more stringent and are being introduced with a view to achieve the goal to strengthen the independence of statutory auditors and improve quality of audit. It appears that the Government is keen to ensure that the independence of statutory auditors is not affected by any weakness in the corporate governance.
4. Accountancy Museum:
ICAI – Accountancy Museum was opened at ICAI Bhavan, Noida, on 2-2-2009. The museum presents rare and historic images (evidence of the oldest balance sheet in human civilisation) and documentary evidence of the evolution of accountancy in India. The items on display include the minutes of Indian Accountancy Board (responsible for the birth of the Institute), first gold medals of R.A. final and CA final examinations, first annual report of the Council, our own first balance sheet, rare photographs and so on. It presents very unique images including documents that have been acquired from the British Museum, London, and other private collectors from India as well as abroad. This museum will serve as a great source of learning, inspiration and professional pride for all of us.
5. Results of CA. Examinations:
i) CPT (December, 2008) – out of 89,253 (including 11,588 girls) students who appeared, 34,251 (38.3%) passed CPT examination.
ii) Final (November, 2008) – Both Groups – Out of 14,606 students who appeared, 2,961 (20.27%) passed.
Group I – out of 6,588 students who appeared, 1,235 (18.76%) passed.
Group II – out of 9,235 students who appeared, 1,952 (21.13%) passed.
6. MoU with CPA Australia:
ICAI has signed MoU with CPA Australia. As per the MoD reached, members of ICAI who are graduates will be eligible for CPA Australia membership on passing one paper on Business Strategy & Leadership. On the other hand, members of CPA Australia will be eligible for ICAI membership, subject to passing two papers on Corporate and Allied Laws and Taxation and two more papers on Advanced Auditing and Professional Ethics and Financial Reporting, if they have not already passed them as part of the CPA Australia programme.
This MoU will open professional opportunities to our members in Australia and this will bring the two countries, India and Australia, closer.
7. Auditing Standards:
The following Auditing Standards are issued and published in C.A. Journal for February, 2009 on pages stated below:
i) Standard on International Audit (SIA) 12
Internal Control Evaluation (Page 1444-1448)
ii) Standard on Internal Audit (SIA) 13
Enterprise Risk Management (Page 1449-1450)
iii) Revised Standard on Auditing (SA) 530
Audit Sampling (Page 1451-1456)
iv) Revised Standard on Auditing (SA) 540
Auditing Accounting Estimates, including Fair Value Accounting Estimates and Related Party Disclosures.
8. ICAI News:
(Note: Page Nos. given below are from CA. Journal for February, 2009)
i) Enhancing Audit Quality:
Some observations made by the Financial Reporting Review Board are listed on Page 1417 in order to enable members to improve the quality of audit of corporate bodies. These observations relate to presentation under various heads in Balance Sheet and Profit & Loss AI c. as required under Parts I and 11 of Schedule VI of the Companies Act.
(ii) Certificate Course on Enterprise Risk Management:
The Internal Audit Standards Board of ICAI has launched the above course for our members. The duration of this course is 200 hours spread over 6 weekends. Details are given on Page 1431.
iii) ICAI publications:
a) Manual on Concurrent Audit of Banks.
b) Technical Guide on Review and Certification of Investment Risk Management Systems and Process of Insurance Companies.
c) Guide to Implementing Enterprise Risk Management.
