Hon’ble Union Minister for Civil Aviation, Shri Praful Patel ji, Dignitaries, Past Presidents and Past Members of the Council of the Institute, my Colleagues on the Council, Members of Regional Councils and Members of Branches of Regional Councils, Fellow Members of the Profession, Students, Prize Winners, Employees of the Institute, Ladies and Gentlemen. At the outset, I welcome you all to this 58th Annual Function of the Institute of Chartered Accountants of India (ICAI).
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2. May I, Hon’ble Praful Patel ji, at the outset, express our sense of gratitude for having been extremely generous in according priority to this function, despite your hectic schedule. To you, Sir, I feel particularly grateful and appreciate this gesture of your interest in the growth and development of our profession.
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3. Annual Functions of the Institute have always been a privileged occasion for me, ever since I became a member of this noble profession. To me, this Annual Function of the Institute is the most memorable event, as this would be the last significant event that I would be performing as the President of the ICAI.
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4. Ladies and Gentlemen, I would take this opportunity mainly to highlight some of the most important events and occasions with which the Council of the ICAI has been concerned with during the last 12 months. For detailed appreciation of the multifarious activities carried out by the Committees of the Council during this period, reference may please be made to the separate booklet titled “Moving Beyond – The Year That Was … 2007” already handed out, along with a copy of the Annual Report for the year 2006-07. I would earnestly request you all to kindly go through these documents for appreciating the pivotal role being played by the Council, in pursuit of the avowed responsibilities assigned to it by the Parliament of India.
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5. Sir, as India surges ahead on the road to being an economic power on the world’s economic map, it is essential to nourish the surge with an unshakeable confidence of the investors world over in the capital market of our country. While the Government is doing its own bit to nourish that confidence by providing greater flexibility and openness in operations to the corporate sector, the latter itself has long recognized the benefits of ethics in business and having sound governance practices. In addition, as you know, a fair, transparent and reliable financial reporting is what cements that confidence and smoothens the necessarily rough journey of economic growth. To meet this end, the ICAI, as a vital Partner in Nation Building, has been helping India emerge as one of the most sought after and lucrative investment destinations in the world, by putting in place world-class financial reporting standards as well as internationally benchmarked auditing and assurance standards.
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6. With a strong economy, vibrant trade and industry, investment-friendly Governments, coupled with globally benchmarked accounting and auditing standards in place, the flow of capital to India increases day by day and in such a scenario, the users of the financial statements of an entity are no longer limited to any single country. All the aforesaid, among others, have necessitated the establishment of a single set of globally accepted financial reporting system. The International Accounting Standards (IASs)/International Financial Reporting Standards (IFRSs) issued by the International Accounting Standards Board (IASB) are therefore increasingly being recognised as Global Reporting Standards. Consequently, many countries across the world are converging with IASs/IFRSs issued by the IASB. In India, the ICAI being the premier accounting body has been establishing, since 1977, high quality Accounting Standards, based on corresponding IASs. In certain cases, the Accounting Standards issued by ICAI departed from the IASs, in view of legal and regulatory requirements and economic conditions prevailing in the country. So far 108 countries in the world have adopted or permitted adoption of IFRSs in preparation of financial statements in their countries. Being an important emerging economy in the world, India cannot remain isolated. The ICAI has also recognised the need of convergence. The ICAI also appreciates the fact that convergence would not only help Indian entities raise its capital from abroad at lower cost but its membership at large would also be benefited due to increased opportunities abroad. In addition, the image of the accounting profession and the Indian industry are bound to improve, worldwide.
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7. Accordingly, with the endeavour of achieving total convergence with IFRSs, a Task Force was constituted in 2006 to explore the approach for convergence with IFRSs, and to lay down a road map for achieving convergence with IFRSs so as to make India IFRS-compliant. A Concept Paper was prepared for the purpose and the recommendations therein have been accepted. The principal recommendation in the Concept Paper is convergence with IFRSs for the public interest entities such as listed entities, banks and insurance entities and large-sized entities from the accounting periods beginning on or after 1st April, 2011, subject to its confirmation by the government and other regulatory bodies. For implementation of this decision, a Group on Implementation of Convergence with IFRSs was constituted to carry out various functions for smooth transition to IFRSs from 2011. The Group has further constituted four Sub-groups for preparing the in-house work plan and liaising with the IASB, for approaching the government and regulatory authorities, for liaising with the Industry Associations and for providing education and training on IFRSs to get the members ready for convergence. All the sub-groups have been actively functioning to achieve the objectives/targets.
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8. In the direction of bringing the accounting and financial reporting system prevailing in the country at par with the international financial reporting system, another significant achievement of the Accounting Standards Board of the ICAI during the year is issuance of Accounting Standard (AS) 30 and Accounting Standard (AS) 31, Financial Instruments: Recognition and Measurement and Financial Instruments: Presentation, respectively. These standards are totally convergent with the corresponding IASs, viz., IAS 39 and IAS 32. AS 30 and AS 31 will be recommendatory for an initial period of two years and mandatory for accounting periods commencing on or after 01.04.2011. In addition to these two standards, consequential limited revisions to eight Accounting Standards have also been issued.
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9. Ladies and Gentlemen, I, as the President of the ICAI, firmly believe that having a strong accountancy profession is the key to having a strong financial infrastructure in a country and it directly relates to the ability of that country and of individual companies within it to raise capital at a favourable cost. It is in these directions that the National Advisory Committee on Accounting Standards (NACAS) constituted under section 210A of the Companies Act, 1956 recommended Accounting Standards 1-29 (except AS 8, which has been merged with AS 26) for prescribing under the Companies Act, 1956. These Accounting Standards were examined in consultation with Ministry of Law and have been prescribed under the Companies Act, 1956 through notification number GSR 739(E), dated 7th December, 2006. This is the result of about five year long exercise and is a major joint achievement of the Central Government as well as the ICAI, whereby the Indian Accounting Standards, incorporating the best international practices, have been developed and notified.
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10. Auditing and Assurance Standards continued to be the other thrust area. As a part of its commitment and need to keep pace with the international advancements, the ICAI has charted a well thought out strategy to converge with the International Standards on Auditing being issued by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC) and issued the Revised Preface in 2007. The Revised Preface aims at introducing a new pattern, in which the auditing standards now written will be in line with the Clarity Project adopted by the IAASB. Introducing the umbrella concept of Engagement Standards, it has also categorised the Auditing and Assurance Standards on the basis of the kind of assurance provided by the engagements covered by these standards. Importantly, the standards would be classified and renumbered on the pattern followed by IAASB. The Council has also approved a Revised Due Process for issuing auditing standards. Greater transparency and commitment in the working of the Auditing and Assurance Standards Board (AASB) and rigour and public participation in the standard setting process are the main stay of the revised due process. In addition, revised Standards on Auditing (SA) 240 on Auditor’s Responsibilities relating to Frauds in an Audit of Financial Statements, SA 300 on Planning an Audit of Financial Statements, SA 315 on Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment and SA 330 on The Auditor’s Responses to Assessed Risks have been issued in line with the corresponding International Standards issued by IAASB under the Clarity Project. The underlining point is the fact that the SA 315 and SA 330 represent a change in the audit approach from the conventional transaction based audit to risk based audit to enable the auditor to add more value and quality to his work. Most importantly, the Council approved the first ever mother Standard on Quality Control essential to even think about achieving convergence with International Standards. The year 2007 was also momentous in terms of the first ever visit of the Chairman and Technical head of the IAASB to ICAI facilitating a face to face and free and frank discussion with them on our convergence strategy and progress and the issues that we face in the process.
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11. In our pursuit to keep pace with international developments to enable global acceptance, the ICAI did not forget the fact that more than seventy percent of the audit firms in India are sole proprietors having small and medium enterprise clientele. With limited resources at their disposal they need a lot of support from the ICAI in terms of keeping update and understanding the auditing standards especially the recent ones. Whereas the AASB is already holding training programmes for them, it is also in the process of finalizing a comprehensive Training Material on Auditing and Assurance Standards. Besides, the AASB has also come out with a publication titled Practitioner’s Guide to Audit of Small Entities, targeted at helping small and medium practitioners perform effective and efficient audit of small entities.
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12. So far as helping the corporate India remain competitive in the face of all odds, our members as internal auditors have been on the forefront of helping these enterprises cope with competition of every type by helping them understand and manage risks appropriately and as a corollary, make an effective and efficient use of their scarce economic resources. I am happy to note that the Committee on Internal Audit has brought out important literature on internal audit in the form of two Standards on Internal Audit viz., Documentation and Basic Principles of Internal Audit, an Industry specific Technical Guide on Internal Audit in Upstream Oil and Gas Companies, benchmark publications such as Guide to Risk-based Internal Audit. The publication, Guide to Assessment of Internal Controls Over Financial Reporting, I am sure, would go a long way in strengthening the objectives desired to be achieved by Clause 49 of the Listing Agreement.
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13. As more and more local bodies are shifting from cash basis to accrual basis of accounting, a need was being felt for a single set of high quality financial reporting standards for Local Bodies for setting out recognition, measurement, presentation and disclosure requirements dealing with transactions and events in general purpose financial statements of Local Bodies. Recognising the need to harmonise and improve accounting and financial reporting among Local Bodies, the ICAI constituted an independent Committee on Accounting Standards for Local Bodies (CASLB) with the primary objective of formulating Accounting Standards for Local Bodies on accrual basis.
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14. The CASLB has already brought out the Preface to the Accounting Standards for Local Bodies. It has also circulated drafts of proposed accounting standards for Local Bodies on Revenue from Exchange Transactions and Borrowing Costs for comments as per the laid down procedure. While formulating Accounting Standards for Local Bodies, the CASLB gives due consideration to the International Public Sector Accounting Standards (IPSASs) prepared by the International Public Sector Accounting Standards Board (IPSASB) of the IFAC and seeks to integrate them, to the extent possible, with a view to facilitate global harmonisation.
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15. Apart from formulation of Accounting Standards for Local Bodies, the Committee also takes steps in facilitating improvement in accounting methodology and systems of Local Bodies, and acts as a forum to receive feedback from Local Bodies regarding problems faced by them in the adoption of accrual accounting and in application of the relevant Accounting Standards.
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16. The ICAI is not only one of the most dynamic institutional systems in the world but also the most responsive to the economic environment in which it operates with a view to promote and protect the stakeholders in external financial reporting. The Financial Reporting Review Board (FRRB), one of the ICAI’s initiatives to sensitize the stakeholders for the effective and efficient compliance with the generally accepted accounting principles, has been continuing its review of general purpose financial statements of enterprises in which the public is substantially interested. I am happy to inform that the FRRB got its due recognition from the office of Comptroller and Auditor General of India with their involvement for the financial review of general purpose financial statements of public sector undertakings.
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17. I am happy to report that the Peer Review mechanism introduced by the ICAI, as a pro-active measure, with the object of ensuring maintenance of and enhancement in the quality of services rendered by the members while performing attest functions, has been gradually accepted by the members of the profession as well as the regulatory authorities. In this regard, I would like to mention a specific and recent development that the Securities and Exchange Board of India (SEBI) made a suggestion to the ICAI that the audits of listed companies, wherein substantial amount of public money was involved, shall henceforth be audited by the auditors whose firms have undergone peer review and also granted Peer Review Certificate by the Peer Review Board. This suggestion of SEBI has been accepted by the Council and SEBI has been requested that the requirement of audit firms appointed for audit of listed companies having undergone peer review may be made effective from 1st April, 2009.
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18. The ICAI, as part of its professional development activities, has achieved a new milestone with introduction of CA Networking Portal. This Portal will facilitate networking among the Chartered Accountants, not only within India but also outside India. Another major initiative, to facilitate growth and development of the members of the profession in India, has been the organization of Global CA Networking Summit in January, 2008, which was welcomed by the members within the country and abroad. This will serve as a catalyst for growth of professional firms and facilitate them to become full service large firms ready to take up challenges of global village. The ICAI has been taking various initiatives for professional development and works very closely with the regulators. One of the proactive measures taken during the year was to have interactive meetings with chartered accountants serving as independent directors on the Boards of Banks and the holding of Audit Committee Workshop for them. ICAI is also working towards facilitating members in moving towards value added services especially in the sphere of knowledge process outsourcing.
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19. In this era of globalization, the ICAI continued to make its presence felt at the fora of International Organisations like International Federation of Accountants (IFAC), South Asian Federation of Accountants (SAFA) and Confederation of Asian and Pacific Accountants (CAPA). ICAI nominees continued to provide excellent contribution in the pursuits undertaken by these organizations. More so, ICAI nominees have continued to excel and have occupied the highest position and the current CAPA President is the nominee of ICAI.
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20. Emergence of India on the International radar has become very much perceptible when seen in the context of International Delegations from all across the world including countries such as Canada, France, Australia, UK, China, Afghanistan, Mongolia and all SAFA countries making their visit to the ICAI for discussing the matters of mutual interest.
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21. The mobility of our professionals is continued to be pursued in a vigorous manner by the ICAI. Steps have been taken for getting the equivalence exercise undertaken for recognition of qualifications with countries like Australia, UK and Singapore. ICAI see a large demand for our professionals in overseas markets in coming times. ICAI extended the capacity building training programmes to least developed countries such as Mongolia in the area of technical standards, the short term programmes which were very much appreciated and are likely to result in more and more such programmes being undertaken by other countries in future. A MOU with College of Banking and Financial Studies, Oman for rendering technical co-operation for setting up of Accountancy Institute there has also been signed.
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22. With a view to promote better standards in the presentation of information in the financial statements, the ICAI has been holding the annual competition for the ICAI Awards for Excellence in Financial Reporting. This Competition is a prestigious competition in the area of financial reporting which recognises the entities that have achieved excellence in their financial reporting. This year four gold shields and three silver shields are being awarded in different categories. The details about the awardees are available in the separate booklet already mentioned by me. I am confident that in future more and more entities will participate in this competition and seek to win the Awards by striving for excellence in financial reporting. These Awards establish benchmarks against which aspiring entities can measure their own performance. I earnestly welcome and felicitate the spirit of competition in achieving excellence in financial reporting.
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23. The ICAI continues to enjoy a commendable standing with various Government and Regulatory authorities, such as, Ministry of Corporate Affairs, Ministry of Finance, Ministry of Commerce and Industry, Reserve Bank of India, Central Board of Direct Taxes, Comptroller and Auditor General of India, Securities and Exchange Board of India, Insurance Regulatory and Development Authority to name a few and is often called upon to share its expertise, experience and expectations on matters of mutual and professional interests. On all such occasions, the ICAI’s viewpoints have not only been appreciated, but were also largely accepted. I take this opportunity to acknowledge, on behalf of the profession and on my own behalf, the support, help and co-operation extended to us by the Officers of Government–Central and Sates, Regulatory bodies and other appropriate authorities.
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24. I also take this opportunity not only to congratulate the young student prize winners but also to exhort them to bring laurels, to the ICAI, to the profession of chartered accountants in India and above all, to the mother land.
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25. I also congratulate the winners of the Awards for excellence in financial reporting for the year 2006-07, the best Regional Council, best Branches under different categories, best Students’ Association and best Branches of Students’ Association for the excellent performance, which they have displayed for the cause of the profession all along.
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26. I would be failing in my duty if I do not thank my colleagues on the Council, who have been tirelessly working in translating the Council’s shared vision. I consider myself fortunate that I got the unstinted help and co-operation from all my colleagues on the Council, especially Government nominees. I must also acknowledge my immense gratitude to our Vice-President, CA. Ved Jain, who co-shouldered my duties by providing me with all the help and assistance whenever the same were required. My sincere thanks are also due to members of the Regional Councils and of Managing Committees of Branches of Regional Councils. My deep sense of gratitude is also due to the Secretary and staff and officers in the ICAI including the Regional/Decentralised Offices and Branches for their devotion and sincerity.
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With this, I conclude my address and thank you, ladies and gentlemen.
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