Archive for August, 2008

Profession v/s Professionalism

Tuesday, August 26th, 2008

I was trying to analyze the definition of words Profession, Professional Body and Professionalism on (These words are interchangeable used when the Accountants discuss among themselves.)




A profession is an occupation, vocation or career where specialized knowledge of a subject, field, or science is applied. It is usually applied to occupations that involve prolonged academic training and a formal qualification. It is axiomatic that “professional activity involves systematic knowledge and proficiency.” Professions are usually regulated by professional bodies that may set examinations of competence, act as a licensing authority for practitioners, and enforce adherence to an ethical code of practice.

Professional Body:


A professional body or professional organization, also known as a professional association or professional society, is an organization, usually non-profit, that exists to further a particular profession, to protect both the public interest and the interests of professionals. The balance between these two may be a matter of opinion. On the one hand, professional bodies may act to protect the public by maintaining and enforcing standards of training and ethics in their profession. On the other hand, they may also act like a cartel or a labor union (trade union) for the members of the profession, though this description is commonly rejected by the body concerned.


Many professional bodies perform professional certification to indicate a person possesses qualifications in the subject area, and sometimes membership in a professional body is synonymous with certification, but not always. Sometimes membership in a professional body is required for one to be legally able to practice the profession; see licensure.


Oxford Dictionary: the competence or skill expected of a professional.

Graham Ward in IFAC website: Professionalism, is about individual modes of behaviour that command respect and build trust. It is about excellence in service as measured by recognised standards.It is about delivering services or working to standards that meet the needs of and are expected by our clients.


Such behaviours are indeed a necessary part of belonging to a profession but almost any trade could be described as professional in these terms!


As any of us here knows, what separates the professionalism of members of a professional body from the behaviours of other types of so-named professionals, is the requirement to continually reinforce and demonstrate our professionalism, not merely assert it through a one-off qualification. And it is our membership of a professional body – one which embodies the distinguishing features I have defined – that confers on us the obligation to abide by professional standards and regulation.

It is therefore no longer enough for professions to say to the public ‘you must trust me’, today we must earn that trust and demonstrate: clearly, openly and often, why that trust should be given.


Source: Formula One Cars



Of the above three words, I had to search a lot on the word “Professionalism” to find a true meaning to suit accountancy profession. Members of accountancy profession will be normally be expected to take actions that contribute to the public interest.


The Principle of Professional Conduct on AICPA, US website summarizes Professionalism in a precise manner.

Section 51: These Principles of the Code of Professional Conduct of the American Institute of Certified Public Accountants express the profession’s recognition of its responsibilities to the public, to clients, and to colleagues. They guide members in the performance of their professional responsibilities and express the basic tenets of ethical and professional conduct. The Principles call for an unswerving commitment to honorable behavior, even at the sacrifice of personal advantage.

Section 52: In carrying out their responsibilities as professionals, members shouldexercise sensitive professional and moral judgments in all their activities.

Section 53: Members should accept the obligation to act in a way that will serve the public interest, honor the public trust, and demonstrate commitment to professionalism.

Section 54: To maintain and broaden public confidence, members should performall professional responsibilities with the highest sense of integrity.

Section 55: A member should maintain objectivity and be free of conflicts of interest in discharging professional responsibilities. A member in public practice should be independent in fact and appearance when providing auditing and other attestation services.

Section 56: A member should observe the profession’s technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the best of the member’s ability.

Section 57: A member in public practice should observe the Principles of the Code of Professional Conduct in determining the scope and nature of services to be provided.


I would like to see your comments and views on this topic. Please feel free to comment on the blog post.





Santosh Puthran

Source: Management Accountant Blog

Auditor - UK & Indian Companies Acts

Thursday, August 14th, 2008

As per UKs Companies Act, the below are the Provisions governing the qualifications for Appointment of Company Auditor.


25.(1) A person is eligible for appointment as a company auditor only if he

(a) is a member of a recognised supervisory body, and

(b) is eligible for the appointment under the rules of that body.
(2) An individual or a firm may be appointed a company auditor.
A Recognised Supervisory Body means

30.(1) In this Part a “supervisory body” means a body established in the United Kingdom (whether a body corporate or an unincorporated association) which maintains and enforces rules as to

(a) the eligibility of persons to seek appointment as company auditors, and

(b) the conduct of company audit work,
which are binding on persons seeking appointment or acting as company auditors either because they are members of that body or because they are otherwise subject to its control.
On careful consieration of above provisions, it will be clear that UKs companies Act doesn’t prescribe / restrict any qualifications for Company Auditors.

It is the Body of Accountants established in UK which by its laws and regulations Supervise and control the Auditing Function is termed as “Supervisory Body” and its members are eligible for Company Audits.

By virtue of this provisons all Chartered Accounting Bodies (6 in number) which by its laws & regulations Supervising Auditing Functions fallen under Section 25 making their members eligible for Company Audits.

It is pertinent to note here that another Chartered Accounting body estabilised in UK i.e CIMA by its laws & regulations has not adopted the Supervision and control of Audit Function and always stayed as Customer to Audit Function.

Had CIMA adopted the Supervision / control of Audit Function , it would have been Classified as “Supervisory Body” under section 25 making its members eligible for Company Audit.

The conclusion is, it is not the Companies Act which is prescribing / restricting the Auditor’s qualifications, but it is the rules and regulations of the Accounting body defined as “Supervisory Body” which are dominant in making their members eligible or ineligible for Company Audit.

ICWAI, being one of the Two Statutory Accounting bodies established in India, from its incorporation has adopted in its object “Supervision and Control” of Audit Function apart from specialising in Cost and Management Accounting.

When our Political leaders always follow and copy the Laws of Western Countries, why the Audit provision in Indian Companies Act is made so restrictive as
226 (1) ” A person shall not be qualified as auditor of a company unless he is a Chartered Accountant within the meaning of Chartered Accountants Act,1949″

In UK Audit is not compulsory for all Companies and Exempted for certain Small companies subject to Turnover, Balance sheet total and number of employees criteria.
Day by day these threshold limits are getting enhanced and more and more companies are coming out side the purview of Compulsory Audit provisions. As per a Survey, nearly 75% to 90% of companies are outside the purview of Audit provisions.

But these companies have to file their Financial Statements with Government duly certified by a Reporting Accountant.
The provisions relating to Reporting Accountant are
————————————————————————————————————————————————————————————————————————————————–The reporting accountant
249D.(1) The reporting accountant shall be a person who is a member of a body listed in subsectin (3) and who, under the rules of the body is either

(a) entitled to engage in public practice and not ineligible for appointment as a reporting accountant, or

(b) eligible for appointment as a company auditor.
Bodies listed in Subsection (3) are

(3) The bodies referred to in subsection (1) are

(a) the Institute of Chartered Accountants in England and Wales,

(b) the Institute of Chartered Accountants of Scotland,

(c) the Institute of Chartered Accountants in Ireland,

(d) the Chartered Association of Certified Accountants, and

(e) the Association of Authorised Public Accountants.

f) the Association of Accounting Technicians,

(g) the Association of International Accountants, and

(h) the Chartered Institute of Management Accountants.”
On careful consideration of the above provisions, it is clear that CIMA is also a recognised body for certifying the Financial statements by its members as a Reporting Accountant. This is because

a) CIMA members are entitled to Public Practice as per its laws & regulation (though not Audit & Assurance Function)
b) CIMA has not made its members ineligible for appointment as “Reporting Accountant”
c) CIMA always advocated that they are Accountants in Business and the word “Accountant” rightfully belongs to them.
As per Regulation 7 of CIMA council related to Members in Practice

accounting services includes advice and services in connection with

(i) financial and management accounting;
(ii) book-keeping and accounting records;
(iii) the provision of tax returns, the computation or other matters of direct and indirect taxation (including DSS contributions);
(iv) budgets, forecasts, cash flows, and business plans;
(v) funding to businesses;
(vi) company secretarial matters; and
(vii) accounting systems and management reporting.

It is clear from the above that it is the CIMA’s rules that made their members eligible for appointment as “Reporting Accountant” as per seciton 209(D)(1)(a) of Companies Act. It is the maturity and the wisdom of the law makers.

Accordingly the practising members of CIMA are entitled to certify the Financial Statements of 75% to 90% of the companies as “Reporting Accountant” which are outside the purview of full Audit.

In Canada, in its wisdom, removed the Monopoly of CAs in Audit & Assurance functions of Publicly Traded companies and CMAs are equally recognised for Full Public Accounting Rights.

Again, why the Indian law makers who always follow the western laws and provisions are allowing only one out of TWO Statutory Accounting bodies for all the recognitions depriving the rightful position / benefits of the members of other Accounting body i.e ICWAI

Members are requested to share their views.

Thanks & Regards
CMA.Siva Rama Krishna Srirangam