A parliamentary Bill the ICAI needs to take note of

News: The Lok Sabha approved a Bill to amend the Chartered Accountants Act, 1949.

The law governs the Institute of Chartered Accountants of India (ICAI). The amendment bill aims to improve discipline, governance, administration, and accountability of ICAI. Following are its main provisions:

1. The ICAI’s disciplinary committee and board of discipline will be chaired by non-chartered accountants (CA)
2. Elected council members will no longer be in a majority in disciplinary committee.
3. The term of the ICAI’s Council will be raised from three to four years.
4. The maximum number of consecutive terms for its elected members will be reduced to two from the current three.
5. ICAI will appoint its auditor from the Comptroller and Auditor-General of India’s panel of CA firms

What is the need of the amendment bill?

Training, disciplinary record:

Despite the difficult examination and articleship (Practical training) for CAs, some skills seem to be lacking to succeed in the corporate world. Skills include, analytical ability, critical thinking, grasp of technology and communication and presentation skills. CA student enrolment is also decreasing.

The ICAI has also been lax in acting against errant members. In 2018, the Government had set up the National Financial Reporting Authority as India’s first independent regulator of accounting and audit. This along with a new amendment will effectively reduce ICAI to an examination board.

Historical Baggage:

CA has not kept pace with the changes in India’s economy and society. ICAI was set up in 1949, largely as the Indian version of the U.K. institute. The focus of Indian business back then was how to make money by beating the system rather than improving efficiency and competitiveness. The CAs focused on getting low-value work from government entities, such as, tax audit, public sector bank branch audit etc. This is presently not sustainable.

Technological advancement:

Artificial Intelligence/ Machine learning can reduce the need for human intervention in accounting. Recent reforms such as faceless tax assessment, prompt refunds, abolition of GST audit have reduced government mandated business for CAs. It might be the reason behind popularity of overseas qualifications such as the Association of Chartered Certified Accountants (ACCA) in India, as they are more relevant to future needs.

Indian Institutes of Accounting (IIAs)

The Parliamentary Committee has suggested starting Indian Institutes of Accounting (IIAs) on the lines of IIT/IIM. They will offer a course based on accounting, auditing etc., ending ICAI’s monopoly over certification. IIAs can greatly enhance the quality of education with a wholesome curriculum.

Way forward: Accounting instituted in other countries including the UK have changed. The ICAI also needs to respond maturely.

Source: This post is created based on the article “A parliamentary Bill the ICAI needs to take note of” published in The Hindu on 31^st March 2022.