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New Delhi , Dec. 15

A STRONG political consensus on a new direction for the accounting system is essential before any overhaul of the Government accounting system is undertaken, the Comptroller and Auditor-General of India (CAG), Mr V.N. Kaul, said here today.

Inaugurating an international symposium on "Standard Setting for Government Accounts", organised by CAG, Mr Kaul emphasised that this consensus has to be achieved not only in the Centre but also in the States.

"Any accounting reform has to be a part of a larger integrated public financial management initiative. As there is no clearly established theory of a relationship between financial reporting of a particular type and the well being of the people, political consensus not technical issues will determine the success of accounting reform. This is likely to take time," he said.

He said that the Government Accounting Standards Advisory Board (GASAB) would have a central role to play not only in formulating standards but also in conceptualising and calibrating accounting reform and in building a constituency for it.

"The first requirement would be to develop a conceptual framework which clearly defines the objectives of financial reporting in the new circumstance and then set and implement a roadmap on how to achieve these objectives. Our aim should be to reduce diversity in an increasingly globalised world, particularly on issues of measurement and disclosure," Mr Kaul said.

He highlighted the growing agreement about the need for a dramatic improvement in the publication, communication and usability of financial accounts of the Government.

Further, Mr Kaul underscored the need to consider, in due course, the harmonisation of the system of Government financial statistics with the changes proposed in the accounting system.

He also made it clear that no decision has yet been taken in India on the need to move to an accrual-based Government accounting system from a cash-based system. "Some pilot exercises have been proposed by the Controller-General of Accounts and based on the experience of these exercises, the future course of action will be determined," Mr Kaul said.

The President of the Institute of Chartered Accountants of India (ICAI), Mr Bupathy, called for a synergy between the activities of the institute and that of GASAB for pooling together of expertise. He also announced that the exposure draft of the framework for the presentation of financial statements of governmental bodies such as urban local bodies is nearing completion, and is likely to be issued in near future.

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