The Hindu Business Line : Know more about WTO

THREE letters that many desi chartered accountants fear are WTO, because the bogey of foreign invasion frightens these professionals to no end that they fail to see anything beyond the confines of their own interest. Not that I support wholesale opening up of the field to all players, even as local CAs wage a losing battle with their collective backs to the wall. Yet, it is necessary that the accounting fraternity grasps what the WTO is all about, and how it impacts the clients served by the profession.

It was only recently that the Institute of Chartered Accountants of India woke up to this lacuna in the education it imparts and introduced the `Post Qualification Course in International Trade Laws & WTO'. Ideal read, not only for the candidates of the new course but others too, is P. K. Vasudeva's World Trade Organization: Implications for Indian Economy, from Pearson Education (www.pearsoned.co.in).

"The WTO not only provides a continuous forum for negotiations but also offers timetables for further negotiations," states the preface. Negotiations on rulemaking don't end with the adoption of agreements but continue to evolve in the light of practical difficulties arising during implementation, the author points out.

Ministerial meetings are held every two years to thrash out controversial issues, be they in agriculture, services or intellectual property rights. The next ministerial meeting due in December is expected to tackle tariff reduction and also the ever-contentious farm subsidies.

The book has informative chapters on the various components that make up the WTO infrastructure, and also our laws on copyrights, competition and so on. Of crucial importance would be the implications of the WTO's new competition policy on our economy. "There should be necessary provision and teeth to examine and adjudicate upon anti-competition practices that may accompany or follow developments arising out of the implementation of the WTO agreements," argues Vasudeva, when elaborating on legislative changes. An unfolding area, this is, because a New Delhi dateline story of August 22 from Richa Mishra informs that the Ministry of Company Affairs (MCA) is keen on ensuring that the Competition Commission of India (CCI) acts as "the nodal agency to determine if the rules of the game put in place by sectoral regulators have resulted in anti-competitive practices". Catch up also with the `proposed amendments to the Competition Act'.

Stay competitive, with Vasudeva's help!

Cotton costing

A BOOK published by Gujarat Kapas Utpadak Hitrakshak Sangh and `dedicated to Indian farmers' may appear to be out of place in this column. But Bt Cotton: A Painful Episode, edited by Sanat Mehta assumes importance in view of a disturbing development that took place not long ago.

Monsanto agreed to pay a penalty of $1.5 million for having made "an illegal $50,000 payment in 2002 to an Indonesian government official" as you'd learn from www.monsanto.com. Bizarrely, the settlement with the US Department of Justice was also a Deferred Prosecution Agreement or DPA, as in the case of KPMG a few days ago.

One of the chapters is on the performance of Monsanto's Bt cotton, "the first genetically modified crop to be cultivated in India". Authors Suman Sahai and Shakeelur Rehman report that though Bt cotton had a shorter duration (90-100 days, compared to 100-120 days as in the case of non-Bt cotton), plants showed less vigorous growth and suffered from `premature dropping of bolls'. While the non-Bt variety averaged 95 bolls per plant, the average for the Bt variety was only 50 bolls, and that should make a difference to profit, you'd appreciate.

Further problems with the Bt variety were of fibre length, quality, and vulnerability to pink bollworm. "The economics of cultivating Bt cotton is clearly not in favour of farmers," declare Sahai and Rehman. "The seed is about four times more expensive than the good local hybrids. The difference in the price of seed is approximately Rs 1,200 per (450 gm) bag, which is needed to plant an acre. As against this outlay, savings on pesticide were meagre, averaging Rs 217 per acre."

With the help of numbers, the book shows how the Bt cotton farmer has to invest Rs 983 more per acre than his non-Bt counterpart. "60 per cent of the farmers cultivating Bt cotton were not even able to recover their investment and incurred losses averaging Rs 79 per acre." The authors found that none had come to the areas they had surveyed to collect field data for monitoring insect attacks and crop performance. Won't it be a laudable act of social responsibility if professional accounting bodies chipped in with some work on this front? Educative work.

Peer review

ON www.gao.gov you can find a five-page file that includes KPMG LLP's letter dated April 29, 2005, addressed to the Comptroller General of the US after a peer review by the firm of "the system of quality control for the accounting and auditing practice of the Financial Management and Assurance Team of the United States Government Accountability Office (GAO FMA)" for the year ended December 31, 2004.

All well, says the report, appending "as is customary in a peer review" its comments that are "not considered to be of sufficient significance to affect the opinion expressed in this report". For instance, KPMG found that `some documentation of prior year testing' though `cited as part of supporting the assessment of the effectiveness of internal controls', was not included in the work papers for the current audit year. Last of the five pages is a letter from Jeffrey C. Steinhoff, Managing Director, FMA, thanking the firm's peer review team "for its competence, professionalism, and constructive approach to this important engagement".

Don't forget that we too have peer review, to do which the Institute of Chartered Accountants of India has published Peer Review Manual. Peer review is defined as "an examination and review of the systems and procedures to determine whether they have been put in place by the practice unit for ensuring the quality of attestation services as envisaged and implied/mandated by the Technical Standards and whether these were effective or not during the period under review."

By outlining `policies, processes, and procedures' the manual from the ICAI not only helps reviewers in their job but also guides the practice units in enhancing the quality of their work. "Primary objective of peer review is not to find out deficiencies but to improve the quality of services rendered by members of the profession," clarifies the Institute. The message gets repeated: "The reviewer is not going to sit on judgment of the practice unit... " And again, "The key objective of peer review exercise is not to identify isolated cases of engagement failure, but to identify weaknesses that are pervasive and chronic in nature." Worth peering through!

BooksOfAccount@TheHindu.co.in

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