India should set up Indian Institutes of Accounting (IIAs) similar to IITs and IIMs to help develop the accounting and finance professions, a Parliamentary panel said in a report.
The report, titled Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Bill, 2021, was tabled in Parliament on March 23.
It suggested the creation of institutions similar to the Indian Institutes of Technology and Indian Institutes of Management that are counted among the top engineering and business schools.
In advanced Western countries, several accounting and finance bodies lend strength to the profession unlike in India, where three institutes – Institute of Chartered Accountants of India (ICAI), Institute of Cost and Works Accountants of India (ICWAI) and Institute of Company Secretaries of India (ICSI) – manage and lead these professions.
The Parliamentary panel, headed by Bharatiya Janata Party (BJP) MP Jayant Sinha, said IIAs would introduce more competition, lending the overall ecosystem greater strength and gravitas.
Moneycontrol spoke to Debashis Mitra, president of ICAI, for his view on the suggestion.
“Right now, this idea of the Indian Institute of Accounting is just a recommendation of the Standing Committee. So, to begin with, whether the government will accept the proposal or not, remains to be seen,” Mitra said.
One of the aims of the proposed institutes is to foster competition and bring the best out of the accounting and finance professions in the best interest of all stakeholders.
Practicing accounting professionals have some interesting takes on this issue as well as the need for IIAs.
“India has three institutes of repute, and which have been in existence for more than 50 years. All the three have branches all over India, function through elected representatives, and are well organized and autonomous,” said a senior member of the accounting profession, who preferred to remain anonymous.
“One institute – ICAI – has monopoly over the auditing, assurance, attestation and certification functions. Now, if these functions are opened up to the ICWAI and ICSI, it could result in healthy competition. It would complement the overall growth of the finance and accounting profession,” this person added.
“Nurturing the other two institutes for these activities is also building competition. Given that these new institutes will be on the lines of IITs and IIMs, which are basically Centres of Excellence (CoEs), it will surely take a lot of time for these institutes to offer the same quality, attain size and provide competition. So, rather than open a new institute, which is a long-term affair, it would be better to nurture the other two institutes,” he added.
Mitra’s views are largely similar. He said: “ICAI has a long legacy of over 70 years. Its course and exams have been appreciated world over. Even the Supreme Court of India has said the exams conducted by ICAI are among the best. So, it would be a great idea to further strengthen this organization, which has been set up by an Act of Parliament, going forward.”
Certain changes proposed in the governance structure will be good “in the overall sense,” added the senior member of the accounting profession cited above.
“That is welcome. However, it must be emphasized that these institutes are all autonomous, well governed and fall under the Ministry of Corporate Affairs,” he added.
The panel’s report suggested that the education be reasonably priced and liberal financial aid be provided to needy students. “Access, equity, inclusion, diversity and fairness are important,” it said.
The senior accounting professional pointed out that even a farmer’s child living in a remote village can look to study any of three courses at a minimal cost. Articled clerks are paid a stipend too. He wondered if the proposed new IIAs can compete effectively on this front,
“Over 10 lakh students take the exams of the three institutes combined every six months. Also, these exams are held at thousands of centres spread across India and overseas, making it easy and accessible to the students to attend the exams at very low cost. These are huge volumes. Will the new institute be able to provide competition on that front,” he wondered.
Added Mitra, “The course we at ICAI offer is most affordable to all sections of society. Moreover, for students in places like the North-East, Andaman and Nicobar Islands and Jammu & Kashmir, the institute gives up to 75 percent concession on the fees.”
Another senior chartered accountant, formerly part of the Big 4 accounting firms and now a senior faculty member at a major business school, who also preferred to maintain anonymity, said there is a need to develop size in the business of accounting.
Matching the Big Four
According to him, India needs accounting firms with global size to match the Big 4, with a very wide bandwidth covering auditing, accounting, cost, information technology, tax, and cybersecurity, among many other fields.
That’s because with IT and the Internet becoming the operational backbone of industry, the business of accounting cannot remain relevant without equivalent use of the above.
“Size is important. The Big Picture has to be kept in perspective to achieve the desired goal of growing the accounting profession,” he explained.
This was also the reason for the entry of Limited Liability Partnership (LLP) firms, he said. For an accounting firm to be able to function and grow in the current business ecosystem, it needs professionals from various areas – accounting, IT, cybersecurity, tax laws, et al. The concept of LLP should be encouraged to expand in the country, he said.
According to him, while the dynamics of industry in general had evolved and grown to the next level, the accounting profession has remained more of less at the same level. “That needs to be changed,” he said.
Yet another challenge
Accounting is a practical profession, where a lot of practical training is provided to make the candidate professionally ready when he/she completes the course. How does the proposed institute plan to address this issue, asked yet another senior accounting professional who was a part of the Big 4, and who too requested anonymity.
He pointed out the case of lawyers, who would not allow any other expert to argue a case in court, though the lawyer would have taken inputs from such an expert. For this, lawyers have faced a lot of criticism, he said.
“Hence, every profession has challenges, and the best way to address it would be to look at ways and means of improving what is in existence, rather than reinventing the wheel,” he said.
Plugging tax evasion
Prime Minister Narendra Modi has spoken of the need for auditors to live up to the larger expectations of the public in terms of plugging the holes of tax evasion. For that, laws like the Goods and Services Tax (GST) have been rolled out, he said.
Going forward, the accounting profession should strive to adopt tech in a big way, as well as to make tax evasion as difficult as possible, said another industry professional.Find more business, companies and India related stories here