Regulators galore

This forum is for sharing information on code of ethics, queries relating to professional disciplinary mechanism, licensing of practitioners, peer review, quality assurance of firms and the global quality assurance initiative, whistle-blowing, investigation of complaints, discipline in respect of standards or rule breaches in accounting bodies / profession in India.
Forum rules
This forum is for sharing information on code of ethics, queries relating to professional disciplinary mechanism, licensing of practitioners, peer review, quality assurance of firms and the global quality assurance initiative, whistle-blowing, investigation of complaints, discipline in respect of standards or rule breaches in accounting bodies / profession in India.

Regulators galore

Postby bvprabhakar on Fri Feb 19, 2016 6:45 pm

ICAI’s slack cannot justify another watchdog




Recently, a committee appointed by the government to simplify the Companies Act 2013 submitted its report. The report made numerous suggestions on various provisions of the Act. We should remember that many of the provisions of the Act were enacted as a reaction to the Satyam and Sahara accounting accidents. Reactions do not tend to last and the provisions and rules of the Act are being amended almost on a daily basis.

If the recommendations of the committee are implemented, the Act would easily set a record for having the most number of amendments within three years of enactment. One of the major provisions of the Act was to form a body called National Financial Reporting Authority (NFRA) which will recommend accounting standards as well as take action against errant auditors and audit firms.
Regulatory concerns
The call for an independent regulator for auditors is not new. In 2010, the Asian Corporate Governance Association (ACGA) called for an independent regulator. It felt that the ICAI was doing a stellar job in training accountants but not in disciplining them.

Section 132 of the Companies Act, 2013 mandates the job responsibilities of the NFRA. Apart from being the go-to authority for accounting and auditing standards, the NFRA can also take action against auditors who have been guilty of professional misconduct.

If the NFRA were also to run a course to train and certify accountants (powers they don’t have as of now), it could emerge as another incarnation of the Institute of Chartered Accountants of India (ICAI).

The ICAI was not in favour of the NFRA taking over its responsibilities to discipline members but the Committee has decided to go ahead with recommending forming the NFRA without diluting any of its powers.

The ICAI is to blame for the situation it finds itself in. It has grown into a large organisation overseeing around 250,000 members and more than a million students. This size has given rise to a certain quantum of slack. Whether it was Satyam, Sahara, NSEL or DDCA, the ICAI has never been proactive in acting against errant members.
A repeat of sorts
By the time the ICAI could wake up to the enormity of the Satyam saga, the CBI and the CID had the perpetrators in judicial custody. Entities had to approach courts to get information on what action the ICAI is taking against the NSEL auditor of NSEL. The only way in which the ICAI can salvage some brownie points is by taking swift and prompt action and letting everyone know about it.

However, the ICAI slack does not justify the need for another regulator.

The Serious Frauds Investigation Office (SFIO) has been set up with the express purpose of investigating major frauds and sentencing the guilty. Invariably, the CBI, CID, RBI, SEBI and IRDA get involved if there are any frauds in their area of operations.

Courts of law are pretty quick to pronounce judgements against the accused. In such a situation, the NFRA would only be replicating the jobs of many other regulators.

All that needs to be done is to ensure that the SFIO is bestowed with the powers of the proposed NFRA. Having a single regulator would be the right thing to do. Having many would only add to the noise.

The writer is a chartered accountant

(This article was published on February 18, 2016)

http://www.thehindubusinessline.com/opinion/regulators-galore/article8253627.ece
Last edited by bvprabhakar on Fri Feb 19, 2016 6:45 pm, edited 1 time in total.
लागत और प्रबंधन लेखाकार
விலை மதிப்பீட்டு மற்றும் நிறுவாகம் கணக்கர்
దారణ మరియు నిర్వాహకం గణకుడు
ಮೂಲ್ಯ ಮತ್ತು ನಿರ್ವಾಹಣೆ ಲೆಕ್ಕಿಗ
لاگت اور انتظام لیھاکار
コストと管理会計
التكلفة ومحاسب الإدارة
Kosten-und Management Accountant
User avatar
bvprabhakar
 
Posts: 3104
Joined: Sun Aug 10, 2008 12:16 pm
Gender: Male
Country: India (in)
Full Name: PRABHAKAR B.V.
Education: B.Com,MBA,FCMA,ACS,ACCA (UK),ACMA(UK),CPA(USA)
Year of Membership or Passing: 1989
Occupation: Service - in finance and accounting
ICAI (CMA) Membership: FCMA
Karma: 19

Re: Regulators galore

Postby bvprabhakar on Fri Feb 19, 2016 6:45 pm

Post your comments on the above article
लागत और प्रबंधन लेखाकार
விலை மதிப்பீட்டு மற்றும் நிறுவாகம் கணக்கர்
దారణ మరియు నిర్వాహకం గణకుడు
ಮೂಲ್ಯ ಮತ್ತು ನಿರ್ವಾಹಣೆ ಲೆಕ್ಕಿಗ
لاگت اور انتظام لیھاکار
コストと管理会計
التكلفة ومحاسب الإدارة
Kosten-und Management Accountant
User avatar
bvprabhakar
 
Posts: 3104
Joined: Sun Aug 10, 2008 12:16 pm
Gender: Male
Country: India (in)
Full Name: PRABHAKAR B.V.
Education: B.Com,MBA,FCMA,ACS,ACCA (UK),ACMA(UK),CPA(USA)
Year of Membership or Passing: 1989
Occupation: Service - in finance and accounting
ICAI (CMA) Membership: FCMA
Karma: 19


Return to Professional Standards and Ethics


Who is online

Users browsing this forum: No registered users and 1 guest