By Shivanand Pandit
A bill that proposes to amend the Chartered Accountants Act, 1949, the Cost and Works Accountants Act, 1959, and the Company Secretaries Act, 1980, has been passed by the Lok Sabha on March 30, 2022 and the Rajya Sabha on April 5, 2022. The amendments will grant the government greater power over the regulation of these professions. At present, three institutes—The Institute of Chartered Accountants of India (ICAI), The Institute of Cost and Works Accountants of India (ICWAI) and The Institute of Company Secretaries of India (ICSI)—administer and manage accounting professions in India.
One major change among the several amendments suggested was to establish the Indian Institute of Accounting (IIA), although the bill was passed without any reference to it. The suggested IIAs are to provide a five-year undergraduate course in accounting and would add on a post-graduate course, subsequently. The curriculum would concentrate on specialised areas, such as forensic accounting, business analytics, cyber security, valuation, and international tax. Those who pass the course would be permitted to use the title Certified Professional Accountants (CPAs) and they will be given permission to function similar to chartered accountants.
For more than 70 years, the ICAI has been known for its supremacy in accounting issues, including its authority to declare standards on accounting at par with global benchmarks. It has contributed numerous and valid inputs to the areas of taxation, corporate affairs, cost management, auditing, etc. Therefore, the ICAI is known as a strong professional body. Still, this is the first time in history that a government is attempting to disturb the autonomy of the apex body. Predictably, there was a huge outcry over this proposal. Prominent politicians, such as Supriya Sadanand Sule, MK Vishnukumar, Navneet Ravi Rana, NK Premachandran and Saptagiri Sankar Ulaka, strongly expressed their rejection towards the government’s suggestion in Parliament.
Many have opined that similar to developed nations, we should also have manifold organisations that are authorised to select and govern accountants. There are two points that make their arguments null and void. Firstly, by using whatever parameters, India cannot be branded as an advanced nation and there is no necessity of benchmarking ourselves with developed countries. Secondly, the large area of India’s corporate environment is occupied by small and medium enterprises, dissimilar to developed nations. Moreover, these enterprises do not have to obey global accounting or taxation benchmarks.
The other objectionable side is the poor employability of the final products. For instance, if the government founded few IIAs in 2024, the first batch of CPAs would come out in 2029 and their total number will be around 1,00,000. The ICAI has around 7,50,000 students, as of now, and considering the past trend around 1,00,000 students will become chartered accountants (CAs) by 2029. Now, the crucial question is—whether both CAs and CPAs will get sufficient employment opportunities in 2029? As per the current tendency, many CAs select the employment route. The number of CAs going for self-employment has reduced drastically. Moreover, small and medium enterprises are progressively being relieved from audits of all types on the grounds of refining the ease of doing business. This has prompted too many professionals to chase too few clients. People and the government who think that setting up of IIAs will bring competition, and in turn create quality, should consider the employability factor seriously.
Much before 2029, it is projected that artificial intelligence and machine learning will take control of monotonous jobs that accountants perform. The advanced technology will definitely be able to process recurring journal entries. Only value-added tasks would need human involvement. This would lead to another serious issue, namely under-employment. Unfortunately, this matter has not been discussed thoroughly.
If the government wants to launch IIAs to enhance the quality of curriculum and examination standards, the issue can be discussed with the ICAI. It is a known fact that the ICAI always considered global standards before introducing the curriculum for different stages of the programme. According to the latest announcement made by the president of the ICAI, a new curriculum will be introduced soon to meet the requirements of international standards. Therefore, establishing a new institute without healthy discussion with the relevant stakeholders will prove injurious to the world of the accounting profession.
The government spends approximately Rs 350 crore to establish each Indian Institute of Management (IIM). The money is the hard-earned income of honest taxpayers of India. The government should think hard before spending such money, especially when the nation is still attempting to recover from the deadly pandemic. Instead of allocating crores of rupees to a new proposal, a portion of it can be spent on the existing body to meet the requirements through the current infrastructure. This will also result in prudent distribution of funds.
People favouring the introduction of IIAs argue that, of late, many financial accidents or frauds have occurred and only a new institute can prevent them in the future. The argument cannot be respected wholly because only auditors should not be blamed in case of corporate frauds. More auditors from different institutes do not guarantee less number of accounting or financial frauds. In turn, it may bring huge confusion. No doubt, frauds are increasing worldwide, but it is wise to hold a single competent institute accountable when things move in the wrong direction. Authority and responsibility should travel together.
The ICAI is not only an educational organization, but a guiding association of the government. It provides top advice to the government in the areas of accounting and taxation matters. The institute also practises superior quality governance which is followed globally. Therefore, it is impracticable to introduce a substitute for a world-class organisation. Since taxation and accounting is the only area where the government is compelled to obey the international standards, it cannot act singly nor build an organisation replacing the ICAI.
To conclude, the trend of the amendments is becoming the norm. Earlier in October 2018, under the Companies Act 2013, the National Financial Reporting Authority was founded to supervise the auditing profession and accounting standards. Now, a parliamentary panel has endorsed the setting up of the IIAs on the lines of the IITs and IIMs.
Instead of capitalizing on the existing infrastructure, with every new directive the government is trying to step into the territory of the ICAI. From all perspectives, the ICAI is a supreme pan-India educational organisation with adequate infrastructure and goodwill. Therefore, the recommendation of setting up IIAs as a distinct body is not a praiseworthy action.
The writer is a financial and tax specialist, author and public speaker based in Margao, Goa