Relevance: GS-2: Statutory, regulatory and various quasi-judicial bodies; Important aspects of governance, transparency and accountability; corporate governance; ethical concerns and dilemmas in government and private institutions.

Key Phrases: Standing Committee on Finance, statutory monopoly, quality of auditing, financial reporting, Institutes of Accounting (IIA), apex institutes of chartered accountants, cost accountants and company secretaries.

Why in News?

• The Standing Committee on Finance tabled its report on the amendment Bill on three professions — Chartered accountants, company secretaries and cost accountant.

Key Points:

• 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, the Parliamentary Panel endorsed the proposed revamp of disciplinary mechanism.
  • It calls for bringing in non-member as the Presiding officer of the Disciplinary Committee
• It has also recommended putting an end to the “statutory monopoly” enjoyed by the CA Institute over the accounting 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 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 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.
• 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.

Proposed Bill:

The proposed bill was introduced by the Corporate Affairs Ministry in Lok Sabha in December last year.

• Changes have been proposed to existing legislations governing the apex institutes of chartered accountants, cost accountants and company secretaries.
  • It proposed revamp of the composition of the Board of Discipline and Disciplinary Committee in these institutes,
  • The Bill has proposed to have a non-chartered accountant, non-cost accountant and non-company secretary as the presiding officer of the disciplinary committees of the respective apex institutes.
  • Besides, the government has proposed that each committee should have three nominated members who are not a part of the particular institute concerned.

Concerns Raised:

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.

• As 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.
  • It marks a shift 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.
• ICAI, in particular, opposed the appointment of a non-CA as the Presiding officer of the Disciplinary Committee.
  • To placate their concerns, the bill allows the selection of the Presiding Officer from a panel recommended by the Council of the Institutes.

View expressed by the standing committee:

• As per the standing committee, proposed amendments do not take away the professional autonomy of the three institutes in any significant manner.
  • The members of the Disciplinary bodies may thus be appointed as proposed in the Bill.
• 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 was necessitated by various incidents including the major corporate accounting scandals, huge scams that shook the economy, the discovery of shell companies after demonetisation and the lack of action taken or inability to take action against firms

Conclusion:

• 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.

Source: The Hindu BL   DhyeyaIAS

Mains Question:

Q. In light of recent corporate scandals and scams comment the need for reforms in the accounting and finance profession in the country.