The community of Chartered Accountants was in for a rude shock on the 1st of July, 2017, when none other than the Prime Minister, Narendra Modi, graced that year’s annual CA day function. If members were expecting lavish praise recognising their role in implementing the Goods and Services tax regime, which had been rolled out just that day, they were instead met with stinging criticism.
The Prime Minister was perhaps aggrieved that the profession had not done enough to make the then-recent demonetisation project a success. Not without reason. It was the CAs, after all, who handheld their wealthy clients with bringing their cash hoardings into the formal banking system during that tumultuous period. As a community, especially its leadership, the profession is known to be among the biggest cheerleaders for the ruling Bharatiya Janata Party. Therefore, the government’s stance has been a rude awakening for its rank and file.
The Institute of Chartered Accountants of India is a statutory body set up by an Act of Parliament, and supposed to enjoy a large amount of functional autonomy. However, the last few years have seen the Institute co-opting the government’s policies and preferences, no matter the interests of its members.
For instance, earlier this year, it advised its members to promote Hindi, notwithstanding that a large number of its members come from states where Hindi is not a spoken language. A few years ago, it prohibited its members from criticizing the government’s policies. It was a group of prominent CAs that indulged the government, just before the 2019 elections, with a letter lauding its handling of the economy as a counter-blast to an open letter from national and international economist. Not only was this outside the scope of the Chartered Accountants’ expertise, but also an attempt to wade into the political thicket.
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None of this seems to be currying enough favour with the government though. In 2018, the National Financial Regulatory Authority, which has enhanced powers, was set up. And now, a bill tabled in the Lok Sabha seeks to overhaul the disciplinary mechanism of the institute, as well as its sister institutions – those for Company Secretaries and Cost Accountants.
The ICAI is understandably peeved that its fiefdom has been encroached upon. The latest bill puts a government appointee at the head of the Disciplinary Committee, which is the ultimate authority to punish members for violations. ICAI functionaries lament that only a Chartered Accountant can interpret the accounting rules in such a way as to do justice to the role. However, the functioning of the Committee thus far, headed by prominent members of the institute at different periods leaves much to be desired.
Adjudications are inordinately delayed, and often, leave much to be desired. The final orders against the auditors of Satyam came almost 5 years after the scandal broke. To be sure, the Institute would argue its hands were tied because of judicial interventions.
There is widespread discontent within the chartered accountant community with the way ICAI conducts examinations, elections to its governing bodies that have become extravagant spending spectacles, and mismanagement, in general
If the ICAI has anybody to blame for this state of affairs, therefore, it is only itself. An institution which was considered among the most formidable of financial regulators lost its sway over the last two decades, most of all among its own members. Arguably, despite its best efforts, it has not been able to make any progress in the two areas that its members looked up to it the most – protecting small and medium CA firms from the dominance of large multinational-networked accounting firms, Deloitte, PwC and the like; and to punish firms that ‘facilitated’ some of the big financial scams of the last two decades. The latest amendment helps with the latter, as it gives the Institute powers to proceed against firms.
While it is tempting to argue that this coincides with a fall from grace for institutions across the board, ICAI’s troubles are different in that they are mostly self-inflicted. Perhaps a larger introspection is called for.