The Hindu Business Line : ICAI panel okays framework for `networking' CA firms

CHARTERED accountancy firms may soon be able to deliver services at multi-locational points without having their physical presence at these points. The Central Council of the ICAI has approved the conceptual framework for "networking" amongst CA firms.

Networking is being considered as one of the capacity building measures that would enable Indian CA firms to face the challenges of globalisation. Small firms dominate the Indian CA profession and many of them on account of their size are unable to have multi-locational presence.

An ICAI study group on capacity building measures of CA firms has now recommended that registration of "networking" amongst firms (registered with ICAI) should be mandatory where the intention is to use the collective strength and resources of the network for undertaking any professional assignment. Such type of networks is referred as "formal network".

The study group has in its report defined "networking". It has also held that if different Indian firms were networked with a common multinational accounting firm, then irrespective of the presence/absence of any "affiliate" relationship between the Indian firms inter-se, they would be considered as part of the same network.

The study group has proposed certain rules for a `formal network' amongst firms registered with ICAI. The ICAI council has accepted the recommendations of the study group.

Besides specifying that proprietary/partnership firms as well as individual firms be permitted to form a network, the proposed rules stipulate that a proprietary/partnership firm as well as an individual member should be allowed to join only one formal network.

Further, the network may have distinct name that should be approved by ICAI in accordance with the guidelines to be issued. To distinguish a `network' from a `firm', the study group has suggested that the words "& affiliates" should be used after the name of the network and the words "& Co./&Associates" should not be used.

Formal network means a network with a name where the constituent firms will work as an entity at different locations and with its combined strength. The network only can respond to tenders/enquiries in network capacity. Only one firm can apply on behalf of the network showing the collective strength of all the constituent firms of the network.

The study group has suggested that the network should neither be permitted to advertise nor to use logo and status quo as regards solicitation and advertisement should be maintained.

For `formal network' to get operationalised, the study group has also suggested to the ICAI council that the Government be advised to make suitable changes in the CA (Amendment) Bill 2003 to delegate powers to the council to permit disclosure of information in certain cases.

This suggestion has been made in view of certain stipulation in the Chartered Accountants Act, 1949. This Act provides that a chartered accountant in practice would be "deemed to be guilty" of professional misconduct if he discloses information acquired in the course of his professional engagement to any person other than his client, without the consent of his client or otherwise than as required by any law for the time being in force.

Highlights

* All formal networks to be registered with ICAI

* A proprietary/partnership firm and individual member can be part of only one formal network

* Formal network not to be permitted to advertise or use logo

* Changes suggested to CA (amendment) Bill