Page 7 - A Position Paper on Regulation of Accountancy Profession and Oversight Mechanism in India

Executive

Summary

While India prepares itself for transition to a developed economy and going to be one amongst largest
economies in the world soon, the Indian Chartered Accountancy profession has its own contribution
to this progress march by providing a matured and reliable financial reporting and related governance
system. It has kept at bay the financial turmoil witnessed in developed economies like US and others
which, despite creating a series of reforms in their financial sector, are still trying to grapple with one or
other crisis leading to virtual collapse of the financial systems. The driving point not to be missed here
in the current scenario is that India has not witnessed any sort of financial rattling since Independence
and has always stood on its internal strengths and able to withstand even the shocks that shook the
edifice elsewhere. The Chartered Accountancy profession has been able to provide resilient, vibrant, well
insulated framework and thus able to mitigate and navigate in times of risks and uncertainty which other
developed economies were not able to do so despite their so called well-regulated financial economies!

ICAI has reinforced the role that the accountancy profession has to play in providing high quality financial
information, facilitating market discipline, and fostering confidence of various stakeholders by being a
prudential regulator. ICAI has achieved so focusing on the intrinsic quality of chartered accountants by
quality education & internationally benchmarked training, continuous professional development of its
members in niche & emerging areas. ICAI has also focused on improving quality of financial reporting and
assurance function though framework of standard setting and enforcement of legislative framework for
improving quality of professionals to ensure that they comply to norms laid.
Strong economies no doubt need strong and credible regulatory institutions and regulators. However,
the issue that has not been quite addressed even today to a question posed by the various Parliamentary
Standing Committees on Finance is why in Indian Financial System, there exists multiplicity of regulators?
Few aberrations with alleged involvement of very few black sheep cannot be a premise that the entire
profession and institution be subjected to a scrutiny or review, when others is the Indian accountancy
profession are doing a herald and herculean task in heading institutions be it in Governmental or non-
Governmental sector.

The Company Law in India had its new avatar the Companies Act, 2013. The Companies Act, 2013 is taking
its own time for implementation of various provisions of the Act and the focus is mainly on consolidation,
simplification of the process and procedure for ease of doing business in India with minimum government
interference but with Robust Rules. Prevention is better than Cure. However, practically Caution is better
as compared to taking Care. We have plethora of regulators, regulations, rules etc. Given an entity or
institution birth and berth under regulation of one law, it finds itself to be subjected to parallel layers of
many other regulators and regulations and at the end of day, ease of doing business is done away with
cost and time of compliances, its reporting, filing and leaving business and professionals surmounted
with Doing Business of Regulations compliance only.

Despite its unblemished record of decisions in disciplinary matters through a system of natural justice
evolved over decades, to the world at large, the disciplinary mechanism of the ICAI has been allegedly
seen as a stumbling block where there is perception that things are unexplainably delayed. This perception
gap gets a spike whenever certain corporate scam(s) is/ are unearthed; and when the investigating/
regulatory agencies of the country come up with a major fraud which allegedly portray the suspicion on
role of the Chartered Accountant(s). The increasing frequency with which such different scams/frauds
are unearthed, the magnitude of coverage of such matters in the social media, call for a deeper foray into
the provisions and procedures in the disciplinary mechanism of ICAI evolved over the last several years

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