The Standing Committee on Finance’s report on the amendment Bill on three professions — Chartered accountants, company secretaries and cost accountants—has come as a double setback to the three institutes — especially the CA Institute—overseeing these professions.

Not only has the Parliamentary Panel— headed by BJP MP Jayant Sinha—endorsed the proposed revamp of disciplinary mechanism (bringing in non-member as the Presiding officer of the Disciplinary Committee) as provided in the Bill, it has also recommended putting an end to the “statutory monopoly” enjoyed by the CA Institute over the accounting profession.  

Competition blues

Stating that multiple bodies on the lines of advanced countries is required in order to promote healthy competition, the Panel has recommended that government must consider setting up Institutes of Accounting (IIA) akin to IITs and IIMs for further development of the accounting and finance profession in the country. 

In its report on the Bill —The Chartered Accountants, The Cost and Works Accountants and The Company Secretaries (amendment) Bill 2021 — tabled in Lok Sabha on Wednesday, the Parliamentary Panel highlighted that the qualification and licensing of accountants in advanced countries like US, UK and Canada is done by multiple bodies unlike in India where one institute has “statutory monopoly” over the “whole profession”. 

The report has noted that the scope for improving the quality and competency of the profession remains limited when one institute has statutory monopoly over the profession.

The Parliamentary Panel felt during their deliberations that multiple bodies on the lines of advanced countries is required in order to promote healthy competition, raise the standard and quality of auditing and improve the credibility of financial reporting.

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Disciplinary Committee

With the Bill, which was introduced in Lok Sabha in December last year, proposing revamp of the composition of the Board of Discipline and Disciplinary Committee in these institutes, the CA Institute sought  a re-look at the provision regarding the composition of disciplinary committee and the Board of Discipline. 

“While believing that the proposed amendments do not take away the professional autonomy of the three institutes in any significant manner, the Committee are inclined to endorse the same without any modification. The members of the Disciplinary bodies may thus be appointed as proposed in the Bill“, the standing committee report said. 

The Parliamentary Panel felt that while the autonomy and independence of the professional institutes should not be interfered with unnecessarily, the integrity associated with financial reporting cannot be diminished in any way since it reflects business standards and financial robustness for the entire country. 

This tabling of the Panel report would now pave the way for the Government to enact the proposed Bill in the current form and revamp the disciplinary mechanism of the three institutes. Indications are the Bill will get enacted in the ongoing Budget session itself. 

Post the introduction of the Bill , the CA Institute had contended that the disciplinary committee revamp, proposed in the Bill, was not the best outcome for it and therefore required a re-look. It had, in particular, opposed the appointment of a non-CA as the Presiding officer of the Disciplinary Committee. 

However, the Parliamentary Panel has not gone with the CA Institute’s plea on this front. 

Bill, a big blow

The Bill is being seen as a blow to the professional institutes as it apparently takes away their powers to guide the outcomes in disciplinary mechanism.

Per the Bill, the Presiding Officer of the Disciplinary Committee would be a non-member of the Institute, which would mean that the Presidents of these bodies can no longer be the Presiding officer.

From the current situation where the five-member disciplinary committee includes three Institute nominees, including the President, and two government nominees, the Bill moots a shift to two Institute members and three non-members including the Presiding Officer appointed by the government.

The blow has, however, been somewhat softened by allowing the selection of the Presiding Officer from a panel recommended by the Council of the Institutes.

Meanwhile, the Central Council of ICAI, which is to meet here on Thursday, is expected to discuss the fallout of the Standing Committee report recommendations on the audit profession, sources said.