PRESENTATIONPRESENTATION

ON ON

OBJECTIVES/ DEMANDS OF THE GROUP TO OBJECTIVES/ DEMANDS OF THE GROUP TO SAFEGUARD INTEREST OF SMP’S / CA’SSAFEGUARD INTEREST OF SMP’S / CA’S

****************

BEFORE THE COMMITTEE MEMBERSBEFORE THE COMMITTEE MEMBERS

AWAKENED CA GROUPAWAKENED CA GROUP FORMED – NOVEMBER 2011FORMED – NOVEMBER 2011 MEMBERSHIP STRENGTH-744MEMBERSHIP STRENGTH-744 OBJECTIVES – AUDIT REFORMS FOR SMP’S AND ALLOBJECTIVES – AUDIT REFORMS FOR SMP’S AND ALL

Group Objectives

3 Bank Audit Reforms.

1 Elimination of

Bogus Firms/ CA’s

2Centralized Allotment ofTax Audits

4Banning ofTendering

Process

5Right To Vote for council To be only For Practicing Members

WHAT IS A BOGUS FIRM/ CA ?

A Bogus firm is where all partners hold COP but one or more partners are

actually engaged in Employment/Business and are enjoying dual income

which is strictly prohibited by Chartered Accountants Act 1949 as amended from Time to time.

A person who is not a member of ICAI but uses stamp/ Membership No of another CA who holds valid COP of ICAI , again a violation of CA Act

Some of the advocates are using the name of CA Firm for on line Tax Audit

Report using Lacuna whereby only Name & Membership

No of CA is to be given

1. ELIMINATION OF BOGUS FIRMS/ CA’S

Whether Bogus Firms/ CA’s Exists and if so in what number ?

There have been lot of discussion on this issue as to whether there exists There have been lot of discussion on this issue as to whether there exists such firms or not and if so what is the authentic number of such firms. A such firms or not and if so what is the authentic number of such firms. A news paper cutting showing arrest of a bogus CA is available and further news paper cutting showing arrest of a bogus CA is available and further instances can be gathered on this issueinstances can be gathered on this issue

The Group’s Objective is not to find such firms , Our objective is to get The Group’s Objective is not to find such firms , Our objective is to get assurance from ICAI and CC members that not even a single such firm assurance from ICAI and CC members that not even a single such firm exists . ICAI must respond to the request of majority of CA’s on this issue exists . ICAI must respond to the request of majority of CA’s on this issue and give a clear assurance within a time frame . and give a clear assurance within a time frame .

In case ICAI / CC member fail to give such an assurance within the time In case ICAI / CC member fail to give such an assurance within the time frame it would be considered by the group that there do exists such firms frame it would be considered by the group that there do exists such firms which must be eliminated in the larger interest of the profession and which must be eliminated in the larger interest of the profession and Society as a whole . Society as a whole .

How does Bogus Firms / CA’s harm the Profession of chartered Accountants ?

Such Firms have been formed in order to obtain Bank Audits / CAG & other Such Firms have been formed in order to obtain Bank Audits / CAG & other concurrent Audits and eating away the share of actual practitioners since quite concurrent Audits and eating away the share of actual practitioners since quite long time , since the criteria for empanelment is based on the Partner’s Strength long time , since the criteria for empanelment is based on the Partner’s Strength instead of Point based method instead of Point based method

Existence of such firms is detrimental to the CA profession at large as it deprives Existence of such firms is detrimental to the CA profession at large as it deprives the share of those actually in the professional practice and the dual loyalty of those the share of those actually in the professional practice and the dual loyalty of those engaged in malpractice is also in violation of employment contracts. engaged in malpractice is also in violation of employment contracts.

Forging some body’s Signature or using stamp is a criminal offence as it tantamount Forging some body’s Signature or using stamp is a criminal offence as it tantamount to forgery and is detrimental to Society and business community at large , hence to forgery and is detrimental to Society and business community at large , hence immediate action is called for to safeguard the interest of all concerned immediate action is called for to safeguard the interest of all concerned

The Bogus firms are a party to disrepute being attached with our noble The Bogus firms are a party to disrepute being attached with our noble profession.profession.

How to eliminate Bogus firms/ CA’s ?

ICAI has to take initiative as the existence of even a single such firm/ CA is a ICAI has to take initiative as the existence of even a single such firm/ CA is a threat to its existence. It should form a dedicated team for this purpose to threat to its existence. It should form a dedicated team for this purpose to isolate members with dual engagements with a cut off date by which no penal isolate members with dual engagements with a cut off date by which no penal action be taken against them , failure to comply should attract penal action action be taken against them , failure to comply should attract penal action against the defaulting members.against the defaulting members.

Every Company should be asked to file an e return with MCA giving details Every Company should be asked to file an e return with MCA giving details

of CA’s along with M. No etc which should be mandatory and other filings by of CA’s along with M. No etc which should be mandatory and other filings by the company should not be entertained unless it files such e returnthe company should not be entertained unless it files such e return

Once the names and membership numbers of CA’s are with the ministry the Once the names and membership numbers of CA’s are with the ministry the list should be forwarded to ICAI who should cross verify the same with CA’s list should be forwarded to ICAI who should cross verify the same with CA’s holding COP . Comparison would isolate CA’s engaged in dual relationshipholding COP . Comparison would isolate CA’s engaged in dual relationship..

Contd..

ICAI can also host on its web site that members who are having such ICAI can also host on its web site that members who are having such dual relationship should surrender their COP by a cut off date failing dual relationship should surrender their COP by a cut off date failing which penal action will be initiated . One of the regional Branch of which penal action will be initiated . One of the regional Branch of ICAI has already taken up such initiative ( Press Cutting available )ICAI has already taken up such initiative ( Press Cutting available )

Similar to the mechanism suggested through MCA web site , the Similar to the mechanism suggested through MCA web site , the data may also be collected from CBDT and erring CA Firms or data may also be collected from CBDT and erring CA Firms or individuals be spotted and penalized . It has come to the knowledge individuals be spotted and penalized . It has come to the knowledge of the group that the developments under this category of errant’s of the group that the developments under this category of errant’s has already taken shape and positive results are expected .has already taken shape and positive results are expected .

How the elimination of bogus firms / CA’s benefit all and in particular small

Practitioners ?

Share of each Member in the allotment of Bank / CAG / Tax Audits will increase , thereby increasing the revenue of Small / medium firms and overall kitty size for all.

Professions Dignity will be restored in the eyes of RBI ,Tax Administrators , Bankers & general Pubic.

legal compliance with the ethical requirements will be ensured which will take our profession to greater heights in the international forum. The ‘C.A’ ‘will truly become Two alphabets of Trust AND Partners in Nation Building .

Why Centralized System of allotment is better than Existing Why Centralized System of allotment is better than Existing

System System ?? a) Existing system of allotment of Tax Audits does not support the a) Existing system of allotment of Tax Audits does not support the

Independence of Auditor. New system will remove dependency on Client for Independence of Auditor. New system will remove dependency on Client for Fees and next year’s appointment besides improvement in Quality of Audit .Fees and next year’s appointment besides improvement in Quality of Audit .

b) Last minute rush of clients resulting in total compromise of integrity and b) Last minute rush of clients resulting in total compromise of integrity and

excellence can be avoided.excellence can be avoided. c) Small practitioners and new comers in practice will get adequate chance to c) Small practitioners and new comers in practice will get adequate chance to

groom up in the profession rather than depending on accountants/ Big Firms groom up in the profession rather than depending on accountants/ Big Firms who try to exploit them.who try to exploit them.

d) There will be equal distribution of work and standard Fees structure rather d) There will be equal distribution of work and standard Fees structure rather

than work allocation depending upon influence & power. The share of each than work allocation depending upon influence & power. The share of each

firm in the cake will improve .firm in the cake will improve .

2 . CENTRALISED ALLOTMENT OF TAX AUDIT.

WHAT PROBLEMS HAVE BEEN ENVISAGED IN THE CENTRALISED

ALLOTMENT OF TAX AUDIT

1 1 That How the remuneration of Tax Auditor will be fixed under various criteria such as That How the remuneration of Tax Auditor will be fixed under various criteria such as - Industry wise  wise turnover wise and town wise ?- Industry wise  wise turnover wise and town wise ?

ReplyReply : : For Remuneration the Basis adopted should be turnover of the assessee , after For Remuneration the Basis adopted should be turnover of the assessee , after all in Banks also there could be so many basis but fees is paid only on the basis of all in Banks also there could be so many basis but fees is paid only on the basis of Branch advances only , WHY NO OTHER CRITERIA IS ADOPTED IN CASE OF Branch advances only , WHY NO OTHER CRITERIA IS ADOPTED IN CASE OF BANKS ,BANKS , there are so many other criteria also but no one has questioned there ?    there are so many other criteria also but no one has questioned there ?   

For Tax Audits Scale of operations is covered by Turnover and there is no significance of region wise criteria , If suppose 15000 is a handsome amount in a small town let it be  after all that assessee who is making turnover of more than Rs.100 lacs can afford to pay  minimum 15000/

2  2  That how the chartered accountant will be appointed keeping in view the relevant That how the chartered accountant will be appointed keeping in view the relevant experience in particular field with respect to the nature of activities scale of activities ?experience in particular field with respect to the nature of activities scale of activities ?

      

ReplyReply : : We are already suggesting that panel of CA's be formed , it will We are already suggesting that panel of CA's be formed , it will resolve the problem of experience in particular field , small firms should resolve the problem of experience in particular field , small firms should also get exposure according to their experience and should have equal also get exposure according to their experience and should have equal participation . Every professional opportunity should not be prerogative participation . Every professional opportunity should not be prerogative of big firms only. of big firms only. 

3 3 That how the appointment will be dealt in cases where assessee come in last That how the appointment will be dealt in cases where assessee come in last stages ?stages ?

Reply Reply : Does a Doctor or a lawyer makes a provision for some one who : Does a Doctor or a lawyer makes a provision for some one who comes at the last stages of breathing, Does he have a separate team or comes at the last stages of breathing, Does he have a separate team or mechanism to deal with such cases. mechanism to deal with such cases. A good Doctor always advices his A good Doctor always advices his patients to come in time so that his life can be saved , a good lawyer patients to come in time so that his life can be saved , a good lawyer always takes his time to study the case before taking up hearing , but always takes his time to study the case before taking up hearing , but unfortunately our system is such that The Chartered Accountant has to unfortunately our system is such that The Chartered Accountant has to entertain the client coming to him at 11.58 PM on the 30th of September. entertain the client coming to him at 11.58 PM on the 30th of September. If the patient comes on a last stage, then he/his relatives have to give a If the patient comes on a last stage, then he/his relatives have to give a declaration absolving doctor from any responsibility ,in case some thing goes declaration absolving doctor from any responsibility ,in case some thing goes wrong. Can such provision be made in our profession too. We are fully wrong. Can such provision be made in our profession too. We are fully responsible for the work done even on the last date.responsible for the work done even on the last date. .. Appointment and all formalities should be completed well in time as in Appointment and all formalities should be completed well in time as in case of BANK AUDITS AND CAG AUDITScase of BANK AUDITS AND CAG AUDITS

4 4 Mechanism of grievance redressal in reference to various possible issues Mechanism of grievance redressal in reference to various possible issues that may arise  ?that may arise  ?

Reply : Reply : There should not be much of problem in this, once criteria of There should not be much of problem in this, once criteria of allocation is finalised with full support of majority of CA's and the panel allocation is finalised with full support of majority of CA's and the panel is formed showing  scale of Fees against particular slab of turnover etc., is formed showing  scale of Fees against particular slab of turnover etc., similar to the way it is done for BANK AUDITS.similar to the way it is done for BANK AUDITS.

Policy of decentralization can not be considered as the same has become a Policy of decentralization can not be considered as the same has become a hindrance in the way of  Independence of Auditorshindrance in the way of  Independence of Auditors

How the Centralized Allotment System will work ?

Panel of CA’s to be formed by ICAI and the categorised list to be handed over to the independent body just like in case of Bank Audits.

Assessesee under Tax Audit to make a declaration about the turnover and deposit Audit Fees with the independent body comprising of Sr. members of ICAI and Officers from MOF latest by 30th April.

That independent body will formulate policy of allotment of Tax Audits on the basis of Category of CA firm and Turnover of the Auditee, and make allotment (City wise) latest by  15th May.

The independent body will upload the name of CA firm, category of CA firm, list of Tax Audits allotted, Turnover of Auditee and the policy of allotment adopted, latest by 30th May, to bring the transparency in the system.

CAs to complete the Tax Audit and register the documents (Audit Report, Balance Sheet) on the ICAI web site and obtain UDIN(Unique Document Identification Number) latest by 30th September. This system is already in operation on the ICAI web site, though still optional. CAs to put, that UDIN on the documents and also mention UDIN in Income Tax Returns.

Digitally signed reports to be UPLODED along with the Income Tax Returns.

Income Tax department, Banks and other authorities be instructed to verify the authenticity of documents from ICAI's web site.

Auditors to submit bills for audit fee to the independent authority, along with UDIN number allotted by ICAI. That authority will make payment of audit fee directly to the CAs after deducting TDS and administration charges. 

*************

Why the power to appoint CA has been given to Banks themselves. Can we work independently in this regime of AUTONOMY?

Such a system is being created, by vested interests, that the auditor should compromise both his Integrity and Excellence.

The MEF should be used as a base empanelment for allotment of concurrent Audits/ stock Audits and revenue Audits by Banks .

Why The category IV firms have been excluded for allotment / Empanelment for RRB Audits ? They should invariable be included .

3. BANK AUDIT REFORMS – ISSUES INVOLVED CONCERNING SMP’S

The membership statistics for the year 2011 shows that only about 44 % The membership statistics for the year 2011 shows that only about 44 %

of the total members are in practice, meaning thereby that the members of the total members are in practice, meaning thereby that the members who are not in practice are in majority. The persons not interested in who are not in practice are in majority. The persons not interested in professional practice VOTE for the profession.  professional practice VOTE for the profession. 

Why in our profession, the Why in our profession, the RIGHT TO VOTERIGHT TO VOTE has been  given to the  has been  given to the members NOT IN PRACTICE , while that is not in the case members NOT IN PRACTICE , while that is not in the case of of ADVOCATES ADVOCATES ??

In case of Advocates only members having license to practice i.e. members In case of Advocates only members having license to practice i.e. members of BAR COUNCIL are allowed to vote. Every LLB is not having right to of BAR COUNCIL are allowed to vote. Every LLB is not having right to vote.vote.

How, the members in service can understand the problems being faced by How, the members in service can understand the problems being faced by the members in practice,  but they are being given Right to vote & the members in practice,  but they are being given Right to vote & decide our fate.decide our fate.

4. RIGHT TO VOTE FOR THE COUNCIL SHOULD BE ONLY TO THE PRACTICING MEMBERS

How we can expect a person , winning with the votes of How we can expect a person , winning with the votes of NON-NON-PRACTICINGPRACTICING members to take care of members to take care of PRACTICINGPRACTICING members. members.

ICAI should be  divided into TWO bodies i.e. one being ACADEMIC ICAI should be  divided into TWO bodies i.e. one being ACADEMIC BODY and other being a REGULATORY BODY.BODY and other being a REGULATORY BODY.

The members after passing academics from ACADEMIC BODY and The members after passing academics from ACADEMIC BODY and interested in practice should get themselves Registered with interested in practice should get themselves Registered with REGULATORY BODY and will get RIGHT TO VOTE, just like in the REGULATORY BODY and will get RIGHT TO VOTE, just like in the Bar Council. Bar Council.

OROR CA COURSE be taught in colleges and ICAI to remain REGULATORY CA COURSE be taught in colleges and ICAI to remain REGULATORY

BODY only to regulate the members in practice.BODY only to regulate the members in practice.

SOLUTION

-Chartered Accountant is a professional but being treated by Govt./ Corporations and other agencies as contractors ,Tenders are called for providing Auditing service which is unethical .

-Every Audit allotment should be by forming PANEL and not by Tenders.

- Rotation of auditor be made compulsory.

5. TENDEREING PROCESS FOR ALLOTMENT OF AUDIT SHOULD BE BANNED

THANK YOU…THANK YOU…

Awakened CA’s Group

WE WELCOME SUGGESTIONS