Finance Bill 2014: A pragmatic step towards financial discipline

The Financial Express in its June 20 issue published a report under the heading "CMAs empowered to audit alongside CAs". The report quoted some chartered accountants (CAs) making derogatory remarks about the qualification of cost and management accountants (CMAs). Some of the statements like "we will not accept it (empowering CMAs to audit alongside CAs)" indicate a bad motive to monopolise auditing function by a small number of qualified accountants. This goes against the government policy of bringing transparency in the financial statements. Below are a few points to clarify the situation.
THE STATE OF AFFAIRS: As per the World Bank estimation, the country needs about 20,000 qualified accountants but there are less than 3,000 such accountants from both the Institute of Cost and Management Accountants of Bangladesh (ICMAB) and the Institute of Chartered Accountants of Bangladesh (ICAB). Only 1,500 out of the 3,000 members are from the ICAB. Again only a portion of the above 1,500 CAs are in practice.  The above provides a scenario of the demand for accountants and the supply side of the same. In view of the above, the quality of auditing in Bangladesh is in question nationally and internationally. Recognising this, the government has been trying to enact the Financial Reporting Act which is also under serious objection from certain vested quarters.
This writer's experience shows that there are a large number of audited accounts where the companies are consistently incurring losses and creating negative net worth. But some of those companies are never defaulted in repayment of bank loans and considered to be good banking clients. Some of the auditors may argue that they do not prepare accounts. Rather it is the management responsibility. They are rather certifying the accounts through test check. But unfortunately auditors' certification without any qualified remark is being used by banks, loan-giving agencies, international community and, above all, by the National Board of Revenue (NBR) that leads the country towards a number of miseries including loss of revenue, sanctioning loan based on creative accounts and above all, defamation of the country in the international community. At this type state of affairs, monopolisation of auditing by only a section of accountants is not the refection of their honest professionalism.
GLOBAL PRACTICE: In the subcontinent, we have inherited most of the legal and accounting references from India. The CMAs in India enjoy a wide range of audit opportunity with similar corporate and legal statutes. The cost accountants apart from cost audit under the Section 233B of the Companies Act, 1956 are also authorised for following audit works:
1. Compliance Audit of Reserve Bank of India-- For the purpose of lending under consortium arrangement/multiple banking arrangements, the banks are required to obtain regular certification from professionals like cost accountants regarding compliance of various statutory prescriptions that are in vogue.
2. Special Audit of Central Board of Excise and Customs (CBEC)- The CBEC authorises cost accountants in practice for special audit in certain cases under Section 11 of Customs Act, 1962
3. Special Audit under Section 14A & 14AA -The CBEC also authorises cost accountants for special audit under Section 14A & 14AA of the Central Excise Act 1944;
4. Half-yearly internal audit of stock brokers and credit rating agencies-- As prescribed by Securities Exchange Board of India (SEBI);
5. Internal and concurrent audit for depository operations--- Under the National Securities Depository Ltd (NSDL);
6. Audit for metering and billing accuracy- Authorised to conduct audit for the Telecom Regulatory Authority of India (TRAI)
7. Stock audit and concurrent audit of many public  and private sector banks in India;
8. State public centre enterprises (SPSEs) audit -- Empanelled by many state public centre enterprises (SPSEs) as internal auditor for auditing financial books of account;
9. Internal auditor for auditing financial books of accounts: Empanelled by many public sector enterprises (PSEs), public and private limited companies as internal auditor for auditing financial books of accounts;
10. Internal auditor for auditing financial books of accounts: Empanelled by many cooperative societies in states as internal auditor for auditing financial books of accounts;
11. Statutory audit for value added tax -- Many states have authorised CMAs for auditing, certification of returns and to appear as authorised representative on behalf of their clients under the Acts. The list of states where cost accountants are authorised to conduct VAT audit;
12. In Pakistan, the State Bank of Pakistan through its prudential circular dated May 07, 2013 authorised the CMAs in the country to certify the accounts being prepared by the enterprises other than the companies.
In England, both the chartered accountants and the cost management accountants can engage in financial audit.
In Canada, members from both CGA and CICA can do financial audit.
In Australia, members from the IPA, Australia and the CPA, Australia can do financial audit.
In Malaysia, members from both chartered accountants and cost and management accountants can go for financial audit.
PRESENT POSITION OF ICAB AND ICMAB: In Bangladesh, both the institutes, ICAB and ICMAB, are under the Ministry of Commerce. The Company Act 1994 gives the members of both the institutes similar authority to do audit, one financial audit and the other cost audit. The BSEC Regulation gives members of both the ICAB and the ICMAB the same status in term of corporate governance audit/certification. The course curriculum for both the institutes is very close. The entry requirement for chartered accountants is minimum 12 class schooling with certain point systems. In the ICMAB, it is graduation with point system. The ICAB requires articleship for three years during studentship whereas the ICMAB requires three years' service experience without which none can be its member. Both the institutes are the members of the same international bodies like IFAC, CAPA, SAFA and enjoy same status.
In the Finance Bill 2014, the NBR has not proposed anything harmful for the chartered accounting profession nor restricted the chartered accountants to certify. The auditing of the company accounts will remain with the chartered accountants and that has been duly recognised and emphasised. Rather, a new field has been opened by the Finance Bill 2014 where the CMAs have been allowed, side by side with the chartered accountants, to certify the accounts of the sole traders or partnership who are submitting accounts prepared by the enterprise staff. In that case the chartered accountants do not have any point to say about the fellow cost and management accountants that the CMAs do not have any experience or efficiency. They have never raised any objection when the accounts are not at all certified by anybody. Rather the ICAB should appreciate the role of the NBR for its emphasis on requirement of certification instead of just submitting the accounts prepared by the officials of the company.
ROLE OF NBR: The NBR for the first time has emphasised on plugging loopholes to maximise revenue without giving much pressure on taxpayers through charging higher tax rate. The NBR has also given due importance to transparency by imposing penalty on the accountants for not doing their jobs properly.
The chartered accountants have not appreciated the efforts of the NBR. They are, instead, blaming the NBR for their own business. The national Finance Bill is a national document containing the philosophy of the government and reflection of its desire to achieve social and financial goals. It does not look into a specific profession. Accountants are considered to be quasi-regulators since laws and regulations give them the responsibility. As such, accounting profession should not be considered as a business. The accountants are rather players in the economy to assist the government machinery through transparent professional job.
The writer, FCMA and FCS,                      is the President and CEO of the Credit Rating Information and Services Limited. mahmedcrisl@gmail.com