The Hindu Business Line : `A grave injustice and inequity caused to the profession'

The new boss of the Institute of Chartered Accountants of India, T. N. Manoharan, is a hands-on prez. For example, he is not waiting for the CA Journal, `the publication and smooth delivery' of which `was disrupted due to circumstances beyond control'. Nor is he banking much on www.icai.org that refuses to open most of the time, despite claims to the contrary by the Institute office.

Instead, Manoharan has sent a detailed e-mail dated March 11 on various issues. What is top on his list is the protest to the withdrawal of exemption Notification No. 59/98-Service Tax dated October 16, 1998, w.e.f. March 1 this year. Suddenly, CAs in practice are liable for service tax in respect of all services rendered by them, so Manoharan doesn't mince words when declaring, "This is a grave injustice and inequity caused to the profession by the Government."

The legal and income-tax practitioners are not liable for service tax and the levy is imposed only on CAs, points out Manoharan. With the removal of `the level playing field', the accounting profession is `at a great disadvantage' he rues.

The communiqué meanders through topics such as anomaly in the `tax return preparers' scheme proposed by Section 139B of the Finance Bill, 2006; the Damocles' sword in bank audit in the form of option to the boards of public sector banks to appoint statutory auditors; and the Chartered Accountants (Amendment) Bill now awaiting Presidential assent.

Manoharan seems to have a bag of dozen values that should be instilled in CAs. The first is `punctuality', because time is of `immense value'. It is a commendable virtue to be punctual in anything that we do, says the prez. "Let punctuality be the hallmark of the CA fraternity. By adhering to time schedules with a commitment, an individual can excel in his performance and earn the confidence of others."

He doesn't spare the administration too, saying, "If the limbs of the ICAI can conduct CPE programmes and other activities with time consciousness, it will bring greater credibility to our organisation." Manoharan exhorts: "Let us value the man-hours of our members and ensure no delay in commencement or conclusion of any of our meetings or programmes. Instead of waiting for those who are expected to join late, let us commence the programme on time and thereby honour those who are punctual."

How does it help? "This approach would inspire those who turn up on time to continue to be punctual and others to emulate them." He then lapses into rhetoric: "Time and tide wait for none. Let ICAI also not wait for any one, including its president, as professionalism is the need of the hour." At this rate, I'm afraid we may soon have a different IST, Institute Standard Time.

Big brother scanning!

On March 8, I'd sent a mail to the ICAI president, seeking an update on the seven-member Financial Report Review Board (FRRB) that the Institute had set up in 2002. That time, the news report was that the Board was "empowered to suo motu look into the published accounts of different organisations, including banks and financial institutions." My poser was, "Is the FRRB active and what is the latest about it?"

Surprisingly, a reply did come the same day, minutes before midnight: "The FRRB is working actively for the last two years. The year 2004-05 was the first year of effective functioning for the FRRB. During the year, the FRRB took up review of general purpose financial statements of 20 companies for the financial year 2002-03, selected on a random basis."

One learns that after completing the reviews of these 20 companies, the FRRB has selected for review, on a random basis, 125 companies. Under the scanner are general purpose financial statements for the year 2003-04 and auditors' reports thereon.

"Out of these 125 companies, reviews of 59 companies have already been completed and the reviews of the remaining companies are likely to be completed shortly."

Some questions remain unanswered, though. Such as: What are the criteria for selection of companies? What were the findings as a result of review? What is the follow-up?

Are companies/audit firms alerted, or is disciplinary action initiated? Will the identity of companies be revealed? Does the ICAI share the info with any other regulatory body, such as SEBI? Perhaps we'd know the answers in due course after the Big Brother finishes scanning the financial statements.

Budget de-link

V. Ranganathan of Ernst & Young has this suggestion for industry bodies: That they convince the Finance Minister about the need to de-link "the proposed amendments (many of which are retrospective) for deeper consideration".

While the Budget is time-sensitive, the various amendments to law are not, argues Ranganathan.

"Historically, the clubbing of tax amendments (such as the FBT) with the Budget has de-focussed the discussion on tax changes," he reasons. Wonder what the ICAI's opinion would be on this.

Cost of probe

A report by Annys Shin dated March 14 on www.washingtonpost.com is headlined, `Fannie Mae Finds More Accounting Errors'. The US mortgage finance giant is reeling under a $10.8 billion accounting scandal. `A team of lawyers and accountants' has prepared a report on the fiasco, and it runs to more than 2,000 pages!

New accounting errors include not taking into account `certain fees and obligations related to its mortgage-backed securities'; and inappropriate recording of `debt related to loans the company had reason to believe would not be repaid'. The sad part is this: "In 2005, the company spent about $569 million on costs related to the probes, its restatement, and shareholder lawsuits... As a result, the company's total administrative expenses for the year soared to $2.2 billion, compared with $1.5 billion in 2004."

We may need to do a similar costing exercise for the probes conducted here.

AccountSpeak@TheHindu.co.in

D. Murali

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