CA vs MBA - Where is the Difference

Introduction - This is part of a discussion a fellow Chartered Accountant is having with regard to the changes our community (read CAs and CA students) wants from the new Central Council and Regional Council for the betterment of the CA course. I put forward here my views regarding the changes required in the syllabus.

Changes required - The first and foremost change that needs to be done, a thing which was necessary for the last two decades, is a proper change in the syllabus. That has never been done. Unfortunately. Not just a change for the heck of it. 

Abolish the MCQ pattern of exams - Not MCQ. Abolish the MCQ pattern of questions at every stage of the CA exams right from Foundation, IPCC to the Final exams and throw it into the dust bin. 

Case studies. Adopt the case study method of learning. Introduce the case study method of teaching. Something which qualified Chartered Accountants don't know. They ask yeh case study kya hota hai Sir? 

Make case studies a compulsory 20-mark question in all papers. In every exam. You want quality. All of us want quality among CAs who qualify. And we will get quality. 

Many of us in our community refer to the highly paid MBAs. I have been a full time MBA faculty at some very good b-schools for a decade at Mumbai and Delhi NCR till 2013. And I am telling this from my experience there in teaching and placements. 

In a recent MCS class of mine someone was asking. Sir, why do the MBAs earn more than us? A very important question for us. And time to sit down and find the answers. 

I still believe the CA final examination to be the most difficult exam I ever had.

Conclusion - This is just one change which has come to my mind. Since we at the Institute of Chartered Accountants of India will be having a new team of 32 elected and 8 nominated Central Council members very soon as well as all Regional Councils pan India with new elected members I think this is the best time to put on our thinking caps and suggest further meaningful changes. This discussion will continue.  

Note - This article was first published on LinkedIn on 26th October, 2021.

ICAI may introduce the Open Book examination Method - My Views

First, The Institute of Chartered Accountants of India (ICAI) should find out by making a global search from similar institutes recognised internationally, what to ask. What should Chartered Accountants know? What are the subjects that should be first thrown to the dustbin from the present syllabus? They can cross-check with ICAI UK, CFA USA, ICSI, ICMAI and the IIM syllabus to see the benchmark.

Second, what are the subjects Chartered Accountants should study from CPT till the Final exams? Full subjects. For example, in IPCC, a very important subject, Strategic Management is a 50-mark paper which has been combined with an unrelated subject, Information Technology also having 50 marks to make it a full paper of 100 marks. A 50-year old method.

Third, comes the paper pattern. Abolish and throw into the dustbin outdated concepts for professional exams like the MCQ pattern. 

Fourth, and very important introduce the case study method of learning. Introduce the case study method of teaching. Make case studies a compulsory question in every paper. 

Fifth, how effective and better the open book exam will be for Chartered Accountants? At this point of time only time will tell us. 

The Concept - An open book exam is one in which students can give answers using their textbooks and notes. Open exams are intended to educate students on how to assimilate data and integrate it thoughtfully and thoroughly. In an open book test, the emphasis is on application rather than remembering knowledge.

ICAI Updates - ICAI is reviewing the possibility of conducting the open book exams and if the same is finalised by February 2022, it will be implemented within six months to one year.

Currently only an elective paper is covered under the open-book system. Students can be given situational case studies during the exams if they can find a solution to it by referring to the book.

This article was first published in LinkedIn on 4th November, 2021. 

To be continued  

What are Non Audit Services and Why Auditors are Debarred from it

The prime motive of introducing the provisions under Section 144 of the Companies Act, 2013, is apparently to ensure the enhanced independence and accountability of the auditors. 

Guidance Note on Independence of Auditors issued by the Institute of Chartered Accountants of India (ICAI) provides valuable inputs to understand the same.

Independence being a subjective term is one of the most important pre requisites for any auditor before serving any organization, in line with the Code of Ethics prescribed by the ICAI.

Non-audit services are any professional services provided by a Chartered Accountant (audit firm) during the period of an audit engagement which are not connected to an audit or review of an institution's financial statements.

Section-144 - An auditor appointed under Companies Act, 2013 shall provide to the company only those services as are approved by the Board of Directors or Audit Committee, but excluding the following services (whether rendered directly or indirectly to the company or its holding company or subsidiary company, namely:

(a) accounting and book keeping services;

(b) internal audit;

(c) design and implementation of any financial information system;

(d) actuarial services;

(e) investment advisory services;

(f) investment banking services;

(g) rendering of outsourced financial services;

(h) management services; and

(i) any other kind of services as may be prescribed

Prof N. Narayanaswamy, retired Professor of Finance, IIM Bangalore and Chairman, Technical Advisory Board, NFRA, suggests that audit firms should publish an annual report of professional activities undertaken and an external supervisory board to evaluate their audit quality. He has also suggested how small audit firms can go about the job.

Revenues from audit as well as non audit fees should be given. Non-audit fees received disproportionately higher than audit fees has been a big debate for reform the world over including India. 

Cases that right now come to my mind and on which I have written extensively over the last one year are the violations made by Deloitte and KPMG (BSR & Associates LLP) in this regard as statutory auditors of IL&FS for 2017-18. The appointment of both were illegal due to their provision of non-audit services. Two companies of IL&FS Group paid a total of Rs. 6.57 cr Non-audit Fees to Deloitte from 2013-14 to 2017-18. The above revenue does not include services provided by Deloitte and its affiliates to other group companies of IL&FS. 

Do refer to the detailed reports published, available on NFRA website, and action taken by NFRA in this regard. Only after reading these two case studies you will have a clear idea about the violations made and the quantum of fees received illegally by these two firms. Also the punishment given by NFRA.

This article was first published in LinkedIn on 6th November, 2021. 

To be continued   

FIR against SREI Promoters and Directors

The case relates to an alleged bank fraud.

The Uttar Pradesh police has registered a first information report (FIR) against crisis-ridden SREI Group’s promoters and directors of certain companies for an alleged bank fraud. The FIR was registered on the basis of a complaint filed by Bhupendra Nath.

The Jaunpur police station has forwarded the matter to the Economic Offences Wing (EOW). 

The Jaunpur Police has, in the FIR, named 22 directors and promoters of SREI Group under relevant sections of the Indian Penal Code.

Hemant Kanoria and Sunil Kanoria, former promoters of SREI Infrastructure Finance are not aware of any such FIR.

The Reserve Bank of India had, on October 4, superseded the board of SREI Infrastructure Finance Ltd (SIFL) and SREI Equipment Finance Limited, owing to governance concerns and defaults by the two companies in meeting their various payment obligations. 

Rajneesh Sharma, Ex- Chief General Manager of Bank of Baroda, was appointed as Administrator of these companies.

FIR Complaint

The complainant, Bhupendra Nath, went to SREI-run Jan Suvidha Kendra for some work, and was duped by the employees of SREI. He found that many criminal activities were being carried out at the Jan Suvidha Kendra, including bank fraud of more than Rs.16,000 cr. 

He reported the fact that at the Jan Suvidha Kendras, money was charged at the whims and fancies of the employees and the amount varied from Rs.1,000 to Rs. 25,000 for the works which are either free or for which a very nominal fee of not more than Rs 100 is charged.

Initially, he filed the police complaint and seeing no effective action he approached the court with 4,000-5,000 pages documentary evidence; upon which the Chief Judicial Magistrate ordered the registration of FIR against the accused persons. 

The 29-pages of the FIR covers detailed methodology as to how the Jan Suvidha Kendras are run and also how the alleged bank fraud to the tune of Rs.16,000 crore was perpetrated through such Kendras.

To be continued

Lenders’ claims worth Rs 22,000 cr from SREI admitted

The administrator appointed by the Reserve Bank of India (RBI) has admitted a total amount of claims worth Rs 22,910.4 cr out of a combined amount of Rs 25,115 cr as demanded by the commercial lenders of SREI Infrastructure Finance Limited and its wholly owned subsidiary SREI Equipment Finance Limited. 

The administrator, Rajneesh Sharma, has rejected claims worth around Rs 1604.6 cr of the commercial banks, while Rs 601.3 cr has been under verification as on November 19, 2021.

The Kolkata bench of the National Company Law Tribunal (NCLT) on October 8 gave its approval to start insolvency proceedings against SREI Infrastructure Finance Limited and SREI Equipment Finance Limited after RBI filed insolvency applications against the two companies.

The central bank filed the insolvency petitions against the two companies just after the Bombay high court dismissed a petition filed by two promoters of SREI group challenging RBI’s decision to supersede the boards of these companies and initiate insolvency proceedings against them.

The second meeting of the Committee of Creditors (CoC) of SREI Equipment Finance Limited was convened and conducted on November 29.

To be continued