The accounting community should work with the Government in framing procedures for inquiry into professional misconduct.
Corporate Affairs Minister Sachin Pilot was perhaps stating the obvious when he said that the National Financial Reporting Authority (NFRA) as an overarching body to oversee the accounting profession is here to stay. The Companies Bill 2012, after all, has already been passed by the Lok Sabha and should see a smooth passage in the Rajya Sabha, subject, of course, to the vicissitudes of parliamentary functioning that has become the ‘new normal’. But what he perhaps left unsaid is that in the Government’s view at least, the regulation of the accounting profession, and in particular the quality of services that they render to the business community, cannot be left entirely to the profession itself. The heartburn within the accounting fraternity over usurpation of the privilege of self-regulation is understandable. After all, the notion that ‘thou-shall-be-Judged-at-the-bar-of-fellow-professionals’ has long been regarded as a salutary principle, going back in time to the formation of guilds of masons, carpenters and the like. Historically, accreditation and regulation went hand in hand. In the case of accountants, the pain has been made worse by the fact that the community of medical professionals and those engaged in the practice of law have, at least till now, managed to preserve their privileges.
But as with everything else, times and mores of the world are changing. The principle of self-regulation is fraying at the edges as misconduct in the rendering of professional service keeps tumbling forth at regular intervals. The medical profession has already begun to feel the heat with the law requiring clinical establishments to register themselves. The day perhaps is not too far off when lawyers too, would be subject to the searching glare of independent third party evaluation of their conduct. In that sense, accountants are fighting against a tide. More so, when in their case the audit work impinges on valuation of financial assets and billions of dollars of international capital are riding on such valuations.
But the Government has not helped its cause by being very coy about its intentions while introducing the legal changes. For instance, in the explanatory memorandum on the clause dealing with the constitution of the NFRA in the Companies Bill 2012, the emphasis was more on its role as a successor to the National Advisory Committee on Accounting Standards, and the objective of overseeing the accounting and auditing services was mentioned in passing as if it was of no consequence. But that is over and done with. In any case, since the Lok Sabha has passed the Bill, it must be assumed that Members of Parliament have applied themselves to the objectives of the new clause and voted on it with full knowledge and understanding, even if the Government did not go out of its way to enlighten them properly. In the event, the accounting community would be better off working with the Government and laying down the procedures for investigation of allegations of professional misconduct so that any member accused thus gets a fair hearing.