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Tuesday, April 8, 2014

Divided you fall-and other lessons from the fall of ICAI, ICSI and ICWAI/ICMAI

When the Companies Act 2013 was in the draft stage, the 3 professional institutes ICAI/ICSI/ICWAI were fighting over how to divide the supposed pie of the additional statutory rewards available, be it designation of their members as key management personnel, pre-certifications, expanding the number and scope of audits etc. Institutes did know which side their bread was buttered, with none daring to offend those in power by analyzing the RIL gas pricing controversy or imported coal based tariff pricing controversy, even though atleast two of them-ICAI and ICWAI-had relevant expertise of the same. Nor did they fight against public waste or corruption or monitoring their members. Now the birds have come home to roost.

ICWAI Initially in Dec13 with the notification of the draft cost audit rules, a storm broke out in the cost accounting professions when it was realized that the scope of cost audit/cost records has been narrowed. At that time, ICAI and ICSI maintained silence on this aspect, with ICWAI left to fight its own battle on the very future of its profession.It postponed its national convention and other events, and focussed on the battle at hand.  In its technical reply to MCA on the rules,
http://www.icmai-wirc.in/assets/pdf_files/WIRC%20Feedback%20final%20PDF.pdf
 WIRC-ICMAI observed that It must be remembered that once the dilution of audit process starts taking  place, it will percolate to all other audits which will be self-destructive process for the Regulation. The institute also gave a more detailed representation where it reiterated the merits of the profession in layperson's language http://www.icmai.in/upload/Institute/Updates/Draft-Rules/Letter-Suggestions-to-SecyMCA141213.pdf
But the representation was in vain, and the final rules notified in Mar14 remained unchanged, and will until the next government is sworn in. But that was not the end of the tale!

ICSI In an ambush, the MCA notified final rules relating to company secretaries requirement and certification, which at one stroke removed the need for wholetime CS/practising CS for most private sector companies! The ICSI was caught unawares, and indeed members and students immediately began protests and agitations. As per the ICSI press release justifying why the Vice President remained at the ICSI office.'A large number of members and students have assembled at the Institute premises at Lodi Road on 4th April 2014. Three of the members were continuing their hunger strike sitting within the Institute Premises. There were agitations at other places all over India on that day. The Police was finding difficult to control the situation, particularly at Lodi Road Office. The ICSI officials rushed to Ajmer to meet the minister who was campaigning, but got little reassurance. They met the MCA officials but got a mixed reply, and indeed pointed arguments about why the change had been done. Despite ICSI's reasoning, the MCA had sharp rejoinders as follows https://www.icsi.edu/Portals/0/MOM.pdf
(a) ICSI stated  about many company secretaries who had received notices of termination of their jobs from the companies who are not too keen to implement governance norms. MCA officials replied that Employment is linked to business cycles in the economy. Government does not guarantee job or work to doctors, engineers, lawyers or any other professional
(b) Regarding that  there is total disillusion among students who have enrolled to the course based on the w
ork  opportunities available..which  have been taken away all of a sudden, MCA said that Institute must plan its intake of students and focus on their quality rather than having anybody and everybody walk in. This is something similar to Government of India’s intake into various services
(c) Regarding the general work demands, the MCA stated that profession must earn its reputation and employment is based on merits.  It should not depend on Government/MCA for ensuring that students/Members of ICSI will obtain employment
(d) To the ICSI's plea of helping in corporate governance, the MCA explained its rationale for dropping precertification on the errors observed by it stating that Assignment of pre-certification of e-forms is government’s expression of confidence on both CAs and CSs on certification matters. However, the quality of certification has been disturbing..A letter in this regard has been sent to President ICSI and ICAI

ICAI Recently, the Competition Commission of India(CCI) found prima facie that .. the choice of the consumer (members of OP) in this case was being limited. The members of OP had no option, but to attend the seminars organized by OP (whatever be the quality of seminars) to get the requisite CPE credits and ordered an inquiry into the restrictive trade practices. If this practice is stopped, then ICAI/ICSI and ICWAI will lose their revenues from seminars, and office bearer's powers/recognition will reduce. Indeed the quality perception of CPE events is itself a wakeup sign for the member services section. like I'd blogged earlier http://andy161.blogspot.in/2014/01/does-mandatory-continual-professional.html    Those interested in the CCI order can read it here  http://www.cci.gov.in/May2011/OrderOfCommission/261/932013.pdf
Also, limitations on audit number in Companies Act 2013, has not gone down well with ICAI since this will make the potential income of members lower

I may be writing a premature obituary of strong and independent professions but I think the writing is on the wall. Without statutory barriers to entry and 'reservation' in professional work/employment, CA/CS/CWA must compete in the open market, often for deskilled jobs in KPOs, shared services and entry level jobs. Hence, to avoid a repeat of the loss in recognition etc following lessons may be insightful 
1) Quality should return to the profession-for example precertification w/o errors
2) True professionalism in training(articleship readily accessible to all, with a high standard of training) and
3) Not depending on statutory work as an essential one but making members ready for service too or to enter new fields like internal audit that is open to all. Indeed, ICWAI had released a slew of internal audit draft guides for public comment on telecom/power etc
4) Respecting other professionals-if ICAI, ICSI and ICWAI had presented an unified front, I doubt MCA would have made these many amendments.
5) Reaching a particular standard and then expecting rewards-Increasing compliance costs of cost audit, secretarial certificate etc w/o adding the intended value is not fair, and that is why India Inc fought back and got ICSI/ICWAI cut down to size..since ICAI is well entrenched, few CFOs/businesspersons would fight ICAI!


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