IIA-SETTING UP OF INDIAN INSTITUTE OF ACCOUNTING-PARLIAMENT PANEL SUGGESTION

SETTING UP OF INDIAN INSTITUTE OF ACCOUNTING

PARLIAMENT PANEL SUGGESTION

A Parliamentary panel on Wednesday suggested setting up of institutes of accounting similar to IITs and IIMs for further development of the accounting and finance profession in the country.

The suggestion is part of the report on ‘The Chartered Accountants, the Cost and Works Accountants and the Company Secretaries (Amendment) Bill, 2021’.

“The committee desires that the government should consider setting up of Institutes of Accounting (IIA) akin to IITs and IIMs for further development of the accounting and finance profession in the country,” it said.

The Parliamentary panel also suggested that multiple bodies, as is the norm in advanced nations, are required to promote healthy competition and raise the standards and improve the credibility of financial reporting and auditing in the country. The government had introduced the proposed bill in Lok Sabha on December 17, 2021, during the Winter session. However, it was referred to the standing committee on December 21, 2021, which today presented its report on the legislation. The Bill seeks to amend the Chartered Accountants Act, 1949, the Cost and Works Accountants Act, 1959, and the Company Secretaries Act, 1980.

The three Acts provide for the regulation of the professions of chartered accountants, cost accountants and company secretaries, respectively.  The Bill also aims to strengthen the disciplinary mechanism under these Acts and provide for time-bound disposal of cases against members of the Institute of Chartered Accountants of India, the Institute of Cost Accountants of India, and the Institute of Company Secretaries of India.

The amendment bill suggested that the respective councils of the three institutes namely the Institute of Chartered Accountants of India, the Institute of Cost and Works Accountants of India and the Institute of Company Secretaries of India, must each constitute a disciplinary directorate, which should be headed by a Director (Discipline) who should be an officer of the institute.

Under the existing Acts, on receiving a complaint, the Director arrives at a prima facie opinion on the alleged misconduct.  Depending on the misconduct, the Director places the matter before the Board of Discipline or the Disciplinary Committee. The amendment bill has amended this to empower the Directorate to independently initiate investigations against members or firms.

The Director must decide whether a complaint is actionable within 30 days of receiving such a complaint. If the complaint is actionable, the Director must submit a preliminary examination report to the Board or the Committee (as the case may be), within 30 days, the provision of the proposed bill says.

Under the Acts, a complaint may be withdrawn if permitted by the Board or Committee. The bill provides that a complaint filed with the Directorate will not be withdrawn under any circumstances. The bill has proposed that the Secretary of the Ministry of Corporate Affairs would chair the coordination committee.

“The secretary can be a member of the committee and represent the government side.The coordination committee may act as the apex body for harmonious regulation as well as overall professional development of the three institutes,” the panel report said.

What is the Indian Institute of Accounting?

On the above issue, an independent witness submitted the following suggestion:

Establishment of Indian Institute of Accounting:- The IIA, as per the house panel, will be established by a central law similar to other eminent educational institutions like the Indian Institutes of Technology (IIT) and the Indian Institutes of Management (IIM). IIA, like IITs and IIMs, will also be set up in different parts of the country and work closely with these institutions along with National Law Universities, and other national and regional institutions.

The proposal is a part of a series of recommendations made on the report on the Chartered Accountants, the Cost and Works Accountants, and the Company Secretaries (Amendment) Bill, 2021, tabled in Lok Sabha on Wednesday.

The panel proposed constituting an IIA primarily to focus on academics while the Institute of Chartered Accountants, or ICAI will be limited to the role of a “licensing agency”. “The proposal visualizes the IIA as an academic institution that educates licensed professionals similar to AIIMS, PGI, JIPMER, National Law Schools. In contrast, the Institute of Chartered Accountants of India will be a professional certification agency, much the same way it is now,” the report stated.

ICAI is a statutory body created by an act of Parliament for regulating the profession of chartered accountancy in the country. The institute functions under the administrative oversight of the ministry of corporate affairs. The IIA will also offer a “competition” to the Institute of Chartered Accountants of India, or ICAI.

IIA will be run by a fully autonomous board of governors which will include both experts and lay persons along with officials from ministries of finance, education, and corporate affairs.

This proposal is for establishing a sting of the Indian Institute of Accounting (IIA) that will raise the standards of accounting education and offer competition to the institute of Chartered Accountants of India.

Outline of What the IIAs would be like:

1. The IIAs will be statutory bodies established by a Central Law similar to IITs and IIMs
2. They will be set up in different parts of India.
3. Each IIA will have a Board of Government consisting of experts, laypersons, and government officers drawn, among others, from the Ministry of Finance, the Ministry of Education, and the Ministry of Corporate Affairs. The board size will be ten.
4. The board will have fully functional, financial, and administrative autonomy for its efficient functioning.
5. The chairman and the members will be eminent persons from business, public administration, accountancy, finance, academia, and so on.
6. The board will appoint the chairman and the members, and they must be free from conflict of interest of any kind i.e., professional, financial, or personal.
7. The chairman and the members will serve part-time and will have a term of three years. They shall not be eligible for reappointment or extension to avoid entrenchment and to bring in new talent regularly.
8. The board will appoint a Director (CEO) for a term of five years. The Director shall not be eligible for reappoint or extension in order to avoid entrenchment. This is particularly important because the board is part-time and Director could develop deep roots.
9. Each IIA will have an Academic Council that will develop the curriculum. The undergraduate curriculum will have financial and cost accounting, auditing, tax, law, business strategy, organizational behaviour, management, governance, and public administration technology, data science, psychology, and other fields relevant to the wide role that accountants play.
10. IIAs will start with a five-year undergraduate programme in accounting. Over time, they will develop post-graduate programmes in specialized areas such as forensic accounting, business analytics, cyber security, valuation, international tax, and other relevant fields. Once these programmes stabilise, they will develop PhD programmes.
11. Admission will be through a national entrance test after secondary schooling under the National Educational Policy 2020.
12. IIAs will be research-driven, they will support research and publications efforts by their faculty generously.
13. IIAs will work closely with national and regional educational institutions such as the Indian Institute of Management, the Indian Institutes of Technology, the National Law Universitas, and other universities and Institutions.
14. From the beginning, IIAs will have an international outlook. They should have students from all over the world including from developing countries. They should aim to get the best faculty from around the world.
15. They should price their education reasonably and provide liberal financial aid to needy students. Access, equity inclusion, diversity, and fairness are important. They should work to raise endowments from the industry.
16. Those who qualify in the undergraduate programme will be given two degrees, a Bachelor of Accounting, and a Bachelor of Business. This will give them a choice of the stream they want to go into.
17. They will be given a licence to practise like Cas. The licence-holders will be called Certified Professional Accountants (CPAs). They will be required to register themselves with a Central Licensing Authority (such as NFRA) which will handle their disciplinary matters.

The proposal Visualizes the IIAs as academic institutions that educate licensed professionals similar to AIIM, PGI, JIPMER, National Law Schools, and so on. In fact, The Institute of Chartered Accountants of India will be a professional certification agency, much the same way it is now.

IIA: Courses offered, admission

The institute will be “research-driven” and offer a five-year undergraduate course in the beginning and eventually offer postgraduate and Ph.D. programs as well. Given liberty of choice, students who will qualify for the undergraduate program will be given two degrees–a bachelor of accounting and a bachelor of business. After graduation, such students will also get a license similar to CAs and will be called Certified Professional Accountants.

The proposed IIA will also have an academic council that will be responsible for developing the undergraduate curriculum. The undergraduate curriculum will include financial and cost accounting, auditing, tax, law, business strategy, organizational behavior, management, governance, public administration, technology, data science, psychology, and other related subjects. Recently, Debashis Mitra, the new chairman of the Institute of Chartered Accountants of India had announced that a new curriculum will be launched this year.

At the postgraduate level, students will have the choice to specialize in areas like forensic accounting, business analytics, cyber security, valuation, international tax, and other relevant fields. Admission to the institute will be done on the basis of an entrance test in line with the National Education Policy 2020.