Should Chartered Accountants enter into practice?

This discussion is constructive appraisal of Accountancy in India and Accountancy Bodies have on the business. The focus will be from point of view of public interest and other stakeholders. Members are expected to discuss from point of view of current legislation prevailing in India and also contrast with international practises. Discuss on MRAs and MOU between the accounting bodies.

This is a open forum. Please share your opinion in professional manner or else face moderation.
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This discussion is constructive appraisal of Accountancy in India and Accountancy Bodies have on the business. The focus will be from point of view of public interest and other stakeholders. Members are expected to discuss from point of view of current legislation prevailing in India and also contrast with international practises.

This is a open forum. Please share your opinion in professional manner or else face moderation.

Should Chartered Accountants enter into practice?

Postby bvprabhakar on Mon Jul 15, 2013 1:14 pm

Unless the ICAI changes its role and becomes more of a quality educator, it would be better to look at other career options and not practice as a CA

I am a relatively small practicing CA, and I get almost 600 mails a month for articleship and for jobs for freshly qualified CAs. Why this sudden flood of applications? Over theyears the Institute of Chartered Accountants of India (ICAI) has quite literally liberalized the passing out percentage to such an extent that today more than 30% students pass out every six months as qualified chartered accountants! It is good that so many CAs are passing out, but, is the institute ensuring that each freshly qualified CA is competent and based on that competency does it ensure that the fresh CA gets gainful employment? Is the ICAI following a sane education policy? Does the industry have the capability to absorb so many CAs? Or are we devaluing the profession by just pushing in numbers without taking care of quality?



I do not deny that there will be brilliant students—but at the same time we are also stuck with mediocre students who proudly prefix their name with ‘CA’! Today a CA can be hired for as little as Rs20,000 per month and still one finds that CAs are jobless! This is as much as a graduate gets in a call centre! Should the ICAI not have a re-look at its policy of passing students?



No job, alternative–practice?


With CAs flooding the market and not getting a job, the alternative is to start a practice—which is easier said than done as the cost of setting up a new practice in metros is very steep with property prices and rentals beyond the reach of most freshly qualified CAs budgets.



I have been in practice for the last 24 years and the challenges faced in practice are phenomenal—especially if you want to follow the straight and narrow path. Clients do not like an increase in fees, traditional practice is getting redundant and does not have value—in fact it is losing monetary value! The new economy is throwing more challenges and unless the smaller firms consolidate and innovate they too will become redundant, with the big CA firms in a much better position to corner all the glory work with economies of scale and contacts at high levels. Let me run you through some traditional practice models and its revenue stream showing which will show that fees have stagnated while costs have gone through the roof.


1. Return filing


The return filing fees in 1990 was Rs1,500 and even now a CA cannot charge more than Rs2,000. The purchasing power of Rs1,500-Rs2,000 was far greater in 1990 whereas in 2013 it does not pay for a dinner for a family of four at a decent restaurant. The same is true for VAT.


2. Assessment hearing


The assessment proceedings have greatly reduced. In any case the same pattern. It was great value to charge Rs2,000 per hour in 1990 and we cannot increase the same by inflation rate. If Rs2,000 of 1990 has become Rs20,000 in value in 2013 we cannot charge Rs20,000 per hour. Even if we charge the client laughs to our face!


3. Audit Fees/Certification Fees


A similar pattern follows for audit fees and certification fees. With much greater risk and responsibility thrown onto the auditors, the clients hate to increase fees. With so many CAs flooding the market, we are developing a rubber stamp culture where CA shopping is done to see who certifies at a lower rate—something like the notaries who run after you outside every court for getting the job done through them!


Costs


Unfortunately CAs have not remained immune to inflation unlike the clients’ propensity to pay appropriate and fair fees! Subscribing to knowledge based websites and purchase of books have all kept pace with inflation and sometimes have outrun inflation, thereby disproportionately increasing operating costs. The articled clerks demand nothing less than Rs5,000 per month, some of them protesting deduction of profession tax, which is a legal obligation on the payer! Cost of communication, power, systems, everything has gone up—but the fees remain fixed to 1990 levels!


I find that a lot of CAs who were doing very well in terms of monetary value in 1990 to 2000 are not making much money in 2013. Today a good fresher CA gets a CTC of Rs4 lakh to Rs6 lakh (these are among the lucky few) and a CA with 20 years experience in practice is not far off from that figure of income. This leaves quite a bitter taste in the mouth.


Innovate and Evolve


We therefore must evolve. One of the methods of evolution is that we need to find ways and means of working together and increasing revenue. We pool together the resources and the knowledge base. Some of us must develop resources and some of us can develop knowledge base. We can then take up larger assignments in the corporate sector. We have to attune ourselves to the changing economy and business structure. We need get together like-minded professionals and evolve a working relationship which can sustain in long run. We need to develop a bigger brand as well.


If one seriously wants to pursue a career as a CA, one will have to assess the focus area of specialisation, whether one wants to go into the industry or practice. Unless the ICAI changes its role, and becomes more of a quality educator rather than an institute which is flooding the market with ‘qualified’ CAs, who do not find jobs, it would be better to look at other career options.

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Re: Should Chartered Accountants enter into practice?

Postby babureddyicwa on Tue Jul 16, 2013 7:26 pm

I am a relatively small practicing CA, and I get almost 600 mails a month for articleship and for jobs for freshly qualified CAs. Why this sudden flood of applications? Over the years the Institute of Chartered Accountants of India (ICAI) has quite literally liberalized the passing out percentage to such an extent that today more than 30% students pass out every six months as qualified chartered accountants!



We have to fully agree with the author and they have to streamline the result. Just comparing the numbers approximately they were just around 80,000 to 90,000 in 1990 to 1995 now they are around 2,00,000 lakhs in the market. they are more then double just mater of 15 years. Looks like more then market growth. So people should compromise for salaries, fees etc...
Our worry is it directly / indirectly impacts other professions like us.

Thanks
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Re: Should Chartered Accountants enter into practice?

Postby RVR on Wed Jul 17, 2013 10:20 am

babureddyicwa wrote:
I am a relatively small practicing CA, and I get almost 600 mails a month for articleship and for jobs for freshly qualified CAs. Why this sudden flood of applications? Over the years the Institute of Chartered Accountants of India (ICAI) has quite literally liberalized the passing out percentage to such an extent that today more than 30% students pass out every six months as qualified chartered accountants!



We have to fully agree with the author and they have to streamline the result. Just comparing the numbers approximately they were just around 80,000 to 90,000 in 1990 to 1995 now they are around 2,00,000 lakhs in the market. they are more then double just mater of 15 years. Looks like more then market growth. So people should compromise for salaries, fees etc...
Our worry is it directly / indirectly impacts other professions like us.

Thanks
Regards
B Babu Reddy B.Com ACMA
Bangalore
9731028777


If we don't differentiate from the other accountants, then we will face the same problem. Right now recession is prevailing in the country and most of the corporates are focusing on "Cost Management" more vigorously . Real "Cost Managers" among our professionals will be in great demand as the businesses have to change to "survival" mode and wait for "growth" opportunities in the future.

Recently I met senior executives of a large hotel chain in the country who runs both luxury hotels as well as budget hotels. One of my friend is building a budget hotel for them under long term lease. I asked the hotel executives about the recession prevailing now and raised doubts about occupancy levels. They told me that during recession, budget hotels will be in great demand and will continue to have higher occupancy levels whereas luxury hotels will find it difficult to get customers during recession period. The hotel chain as a matter of policy builds both luxury as well as budget hotels in balanced proportions so that irrespective of economic conditions, they will continue to survive and grow.

Cost Managers will be in great demand both during recession and growth periods as they are needed for both survival and growth. I wish our members develop "Cost Management" mindset to reap the benefits both during recession and growth periods.
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Re: Should Chartered Accountants enter into practice?

Postby ANRaman on Wed Jul 17, 2013 8:30 pm

My post in some other link is valid here in this link as well. It is in line with what RVR says. I am reposting it here as it didi not evoke responses in that string :


Instead of attempting to define Management Accounting which can be made universally applicable , IFAC can describe a management accounting framework. Different components of the framework should collectively and holistically differntiate it from financial accounting and yet at the same time should be providing solutions to the evolving status of different economies.
For example , a part of this framework can emphasise on cost accounting standards based derivatives which can be very relevant for an economy taking a path of socially sustainable economic development. There can be another part of the framework which can speak of accounting for environment which can be embedded into economies like that of Sweden or Norway. This way, the difference in emphasis by a CMA body specific to acountry's socio economic status is also accomodated in a global framework and does not get labelled as relatively inferior professional body. After all , an accounting institute will be mainly driven by the needs of the economy it caters to and cannot have one size fits all approach.
The above articulation has found lot of support in IFAC PAIB Committee of late in deliberations as well as the agenda is not purely called by the shots of westren economies nowadays as is normally thought off. Therefore , instead of challenging one another definition of management accounting, the global CMA community can get united under an umbrella framework which can accomodate aspirations of all economies throughout the world. However, this suggestio would work only if we want to position ourselves as a CMA body and not if we want to become another financial accounting institute but wearing the cap of a CMA.

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Re: Should Chartered Accountants enter into practice?

Postby supthaeshuThigazh on Wed Jul 17, 2013 8:51 pm

Dear Shri Raman

IFAC has started engaging itself into the periphery which is vital looks like it will move for an MOU with some Management Accounting Body Soon:

FOR IMMEDIATE RELEASE




IFAC Signs Strategic Agreement with The IIA



Collaboration further strengthens united commitment to help restore confidence
to the general public in business reporting and enhancing governance
processes in both private and public sectors

(Orlando, Florida, July 17, 2013) – The International Federation of Accountants (IFAC) and The Institute of Internal Auditors (The IIA) have signed a Memorandum of Understanding (MoU) to create a formal basis for the advancement of risk management and internal controls toward a common goal of enhanced governance.

Signed today at The IIA’s International Conference, the IFAC-IIA MoU outlines a new plan for enhanced coordination, collaboration, and resource sharing that will draw on the strengths and expertise of the two organizations. Both are engaged in the restoration of public confidence in business reporting and enhancing governance processes in the private and public sectors.



“This Memorandum of Understanding further strengthens the important relationship between The IIA and IFAC. It represents our united commitment to serve the public interest and restore the confidence of the general public in business reporting,” said Richard Chambers, president and chief executive officer of The IIA.



As outlined in the MoU, IFAC and IIA recognize that the following are fundamental to an organization fulfilling its objectives, implementing reliable financial management and reporting, and serving its stakeholders and the public interest:

The implementation of international auditing and accounting standards;
Strong risk management practices, including the design and implementation of effective and efficient internal controls; and
An effective governance process.



“IFAC welcomes this opportunity to continue our collaboration with The IIA,” said IFAC President Warren Allen. “Our professions are closely related, we share common goals, and address the same issues. Joining our efforts and voices therefore makes sense.”



Through the development of an Annual Work Plan, the organizations will create structures and processes appropriate to share information and best practices in government, risk management, and internal control as well as in audit methods and the application of international standards.



About IFAC

IFAC is the global organization for the accountancy profession, dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. It is comprised of 173 members and associates in 129 countries and jurisdictions, representing approximately 2.5 million accountants in public practice, education, government service, industry, and commerce.



About The IIA

Established in 1941, The IIA serves more than 180,000 members in 190 countries and is the internal audit profession's global voice, chief advocate, and principal educator. The Institute develops and maintains the International Professional Practices Framework for internal auditing, comprising the International Standards for the Professional Practice of Internal Auditing, and certifies professionals through the globally recognized Certified Internal Auditor. Visit http://www.theiia.org for more information.



Contact:

Laura Wilker

Head of Communications, IFAC

+1-212-471-8707

laurawilker@ifac.org



Scott McCallum, The IIA

+1-407-937-1247
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Re: Should Chartered Accountants enter into practice?

Postby JitendraRode on Wed Jul 17, 2013 9:23 pm

I Seen Chartered Accountant who did know answer of simple question like a person rendering more than one service, Whether his receipts from all services are to be clubed for looking 10 Lacks limit or not. Such type of Chartered Accountants are qualified as practing. I do not want to disclose names of such CAS
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Re: Should Chartered Accountants enter into practice?

Postby JitendraRode on Wed Jul 17, 2013 9:33 pm

how such types of persons are passing is a big question ???????????????
A person who is really having a quality to qualify to be CA but he is not able to pass the CA examination due to CA exam results depends on market demand.
When there is great demand for CAs institute is passing no of students but when there is slack or no demand then their results are very tight.
So a person who is really having a quality is not able to pass the exam
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Re: Should Chartered Accountants enter into practice?

Postby ANRaman on Thu Jul 18, 2013 8:15 am

Dear Shri Veeraraghavan

Research work on internal control and risk management is very intensive in IIA. We had also invited them in PAIB Committee meetings and were benefitted by their presentations and knowledge dissemination. IFAC has strategic partnering with all such resource outfits which have a very robust and deep research process. We need to understand that before being presumptuous.

As RVR, Gururajan and few more keep lamenting just turn the research tap of our institute and make the water run deep and not at surface. Let us then see the value of the profession in the society ridden with cost management pressures today. We should not stop with accounting and auditing costs or validating tax returns.

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