2. Some Ethical Issues
(i) If a member is a partner in more than one firm, is it
permissible to print the names of all the firms on visiting cards,
letterheads, stationery, etc.?
A. There is no prohibition under Clause (7) of Part I of
the First Schedule to the C.A. Act.
(ii) Is a Chartered Accountant / Firm permitted to use logo
on letterheads, stationery, etc.?
A. The use of logo/monogram of any kind/form/style/design/colour
whatsoever on any display material or media, e.g., paper stationery,
documents, visiting cards, magnetic devices, internet or signboard by a
Chartered Accountant or a firm of Chartered Accountants is prohibited.
Use/printing of member/firm name in any other manner tantamount to a
logo/monogram is also prohibited. However, a common CA logo has been allowed
to members, provided it is used in the correct manner within the terms of the
council’s guidelines.
(iii) Is the office of a Chartered Accountant permitted to
go in for ISO 9001: 2000 certification or other similar certifications?
A. There is no bar for a member to go in for ISO 9001 :
2000 certification or other similar certifications. However, the member cannot
use the expression like “ISO Certified” on his professional documents,
visiting cards, letterheads or sign boards, etc.
(iv) If a member has passed any additional course of the
ICAI, is he permitted to print such qualification on visiting cards,
letterheads and other stationery ?
A. Under Clause (7) of Part I of the First Schedule to the
CA Act, a member is permitted to print such qualification on his visiting
cards, letterheads and other stationery. However, he cannot use the
designation “Information System Auditor’ or the like.
(v) Can a Chartered Accountant in practice accept audit in
case the audit fee of the previous auditor remains unpaid?
A. In case the undisputed audit fees for carrying out the
statutory audit under the Companies Act, 1956 or various other statutes have
not been paid, the incoming auditor should not accept the appointment unless
such fees are paid. In respect of other dues, the incoming auditor should, in
appropriate circumstances use his good office in favour of his predecessor to
have the dispute as regard the fees settled.
A company is in the process of setting up a refin-ery in the state of Madhya Pradesh. It is procuring items relating to its plant and machinery for the construction of the refinery from foreign vendors. The transaction is recorded at the rate prevailing on the transaction date. The difference in foreign exchange variation between the transaction date and the settlement date is booked under ‘pre-operative expenditure pending capitalization’, on the ground that the company is yet to commence its commercial operations. No profit and loss account has been prepared by the company and only the necessary details, as per Part II of Schedule VI to the Companies Act, 1956 have been disclosed as ‘pre-operative expenditure pending capitalization’.
Based on the above facts, the company had sought the opinion of the Expert Advisory Committee regarding accounting for foreign exchange differences arising on settlement of liability for procurement of items of plant and machinery from abroad, prior to commencement of operation.
EAC Opinion
The committee noted that Standard AS-11 was notified by the central government under the Companies (Accounting Standards) Rules, 2006 which came into effect in respect of accounting periods commencing on or after December 07, 2006. The notified AS-11 contains a footnote that ‘the accounting treatment of exchange differences contained in this Stan-dard is required to be followed irrespective of the relevant provisions of Schedule VI to the Companies Act,1956’.
On the basis of the above, the committee opined that in respect of transactions in foreign currencies entered into on or after April 01, 2004, but before March 31, 2007, the exchange difference arising on settlement of monetary liability (letter of credit) incurred for procurement of items of plant and ma-chinery from abroad should be adjusted to the cost of the related fixed assets. However, in accordance with AS-11 (revised 2003), the foreign exchange dif-ferences arising on or after April 01,2007 should be charged/credited to the profit and loss account of the period in which the same arise. While applying the above accounting treatment, the requirements of Para 4 (e) (read with its explanation) of AS – 16 “Borrowing Costs” should also be taken into con-sideration. Therefore, the committee is of the view that for this purpose, a profit and loss statement will have to be prepared by the company even during the construction phase. Hence, the foreign exchange differences should not be treated as indi-rect expenses relating to the project and, therefore, not be accumulated as pre-operative expenditure pending capitalization for allocation over the assets of the refinery. [Refer pages 1246 to 1247 of C.A. Journal, February, 2010 issue]
4. Implementation of IFRS in India
The Ministry of Corporate Affairs has issued a press note dated 22.1.2010 in which the roadmap for implementation of IFRS in India has been given as follows:
i) There will be two separate sets of Accounting Standards u/s 211 (3C) of the Companies Act.
The first set would comprise of Indian Ac-counting Standards which are converged with the IFRS’s and which shall be applicable to the specified class of companies. The second set of Accounting Standards will comprise of the existing Indian Accounting Standards and will be applicable to other companies, includ-ing small and medium companies.
ii) The first set of Accounting Standards (i.e., converged accounting standards) will be applied to specified classes of companies in phases as below:
Phase – I : The following categories of companies will convert their opening balance sheets as on the first day of the financial year, commencing on or after 1st April, 2011, in compliance with the notified accounting stan-dards which are converged with IFRS. These companies are: (i) Companies which are part of NSE – Nifty 50; (ii) Companies which are part of BSE – Sensex 30; (iii) Companies whose shares or other securities are listed on stock exchanges outside India; and (iv) Companies, whether listed or not, which have a net worth in excess of Rs.1,000 crores.
Phase – II : Companies, whether listed or not, having a net worth exceeding Rs. 500 crores but not exceeding Rs. 1,000 crores, will convert their opening balance sheet on the first day of the financial year commencing on or after 1st April, 2013, in compliance with the notified accounting standards which are converged with IFRS.
Phase – III : Listed companies which have a net worth of Rs.500 crores or less will convert their opening balance sheet as on the first day of the financial year commencing on or after 1st April, 2014, in compliance with the notified accounting standards which are converged with IFRS.
Companies which fall in the following categories will not be required to follow the notified
accounting standards which are converged with the IFRS (though they may voluntarily opt to do so), but need to follow only the notified accounting standards which are not converged with the IFRS. These companies are:
a) Non-listed companies which have a net worth of Rs. 500 crores or less and whose shares or other securities are not listed on Stock Ex-changes outside India.
b) Small and Medium Companies (SMCs).
iv) Separate roadmaps for banks and insurance companies will be announced at a later date. Necessary amendments in the Companies Act as well as Schedule VI of the Companies Act will be introduced during the next budget session of the Parliament.
5. Accounting and Auditing Standards
The following accounting and auditing standards have been issued by ICAI. The texts of these standards have been published in the February, 2010 issue of the C.A. Journal, on the pages mentioned below. It may be noted that the ‘Standards on Auditing’ will come into force for audit of financial statements for periods beginning on or after 1.4.2011. Other accounting and internal audit standards are recommendatory at present.
(i) Standard on Auditing (SA) 700 (Revised)
– Forming an Opinion and Reporting on Financial Statements (P. 1327 – 1338).
ii) Standard on Auditing (SA) 705 – Modifications to the Opinion in the Independent Auditor’s Report. (P. 1339 – 1348).
iii) Standard on Auditing (SA) 706 (Revised) – Emphasis of Matter Paragraphs and other Matter Paragraphs in the Independent Audi-tor’s Report (P.1349 – 1352).
iv) Standard on Internal Audit (SIA) 17 – Consideration of Laws and Regulations in an Internal Audit (P.1353 – 1357).
v) Accounting Standard for Local Bodies (ASLB) 5 – Property, Plant and Equipment (P.1358 – 1367).
(vi) Accounting Standard for Local Bodies (ASLB) 6 – Events after the Reporting Date (P.1368– 1371).
6. ICAI News
(Note: Page Nos. given below are from the C.A. Journal, February, 2010 issue)
iii) CA Final Results
Results of the CA Final Examination, held in No-vember, 2009, were declared in January, 2010. It has been reported that the performance of students in the final examination has been very poor as compared to last four examinations. ICAI will have to study the reasons for this fall in the performance of students and take remedial steps to improve the position. The figures, as reported, are as hereunder:
i) CA T.N. Manoharan awarded PADMA SHRI
CA T.N. Manoharan, President of ICAI, 2006– 07, has been awarded the title of ‘PADMA SHRI’ by the President of India. It is a great honour and recognition for our profession. Shri Manoharan is from the BCAS family and a regular faculty member in most of BCAS’s programmes. Our greetings and best wishes to him on his achievement!
ii) Branches of ICAI
a) A new branch has been opened on 16.12.2009 at Gandhidham (WIRC). Further, branches will be opened at Ratlam, Pali, Ganganagar, Bhavnagar and Tirupati (Refer P. 1205 and 1310).
b) New branch buildings (ICAI Bhavans) in-augurated at Vapi on 1.12.2009, Baroda on 13.12.2009, Ranchi on 15.12.2009, Guwahati on 18.12.2009, Vijaywada on 25.1.2010, Belgaum on 26.1.2010, Hubli on 26.1.2010, Pune on 26.1.2010, and Nashik on 27.1.2010. (Refer P. 1210).
iv) Signature on Audit Reports
ICAI has decided that members should include the Registration No. of the firm, as allotted by ICAI in the audit reports and signed by them, in addition to other requirements relating to the signature on the audit report as prescribed under the relevant standard on auditing. Further, the auditor should ensure that the resolution passed by the company for appointment of the statutory auditor u/s 224 of the Companies Act, contains the Registration No. of the C.A. Firm. These requirements will come into effect from 1.4.2010 (P. 1312).
v) Submission of Form112 by students for taking other courses
As a measure of amnesty, ICAI has decided that students who have not filed Form No.112 so far, can file the same on or before 31.3.2010. No request for condonation of delay in submitting Form No. 112 will be considered after 1.4.2010. (P. 1312)
vi) Results of Elections to Central and Regional Councils
Details of members elected to the Central and Regional Councils for three years from February 2010 – 2013 have been published on P. 1314 – 1316.
vii) New Office Bearers of WIRC
The following members have been elected as of-fice bearers of WIRC for one year from February 2010.
(a) Shri Sanjeev Lalan, Mumbai – Chairman
(b) Shri Makrand Joshi, Nagpur – Vice Chairman
c) Shri Mangesh Kinare, Mumbai – Secretary
d) Shri Parag Rawal, Ahmedabad – Treasurer
Our greetings and best wishes to them for a successful term of office!
viii) Our New President and Vice President
At the election held on 12.2.2010, the council has elected:
Shri Amarjeet Chopra, New Delhi as our New President; and
Shri G. Ramaswamy as our New Vice President
We convey our greetings and best wishes for their successful terms in office. We hope they will be able to provide better leadership to our profession during the year.
