The Hindu Business Line : Will number-cruncher networks display better bandwidth?

FIRMS of chartered accountants are available in all sizes, ranging from the `S' type having only a lone proprietor, to `XXL' such as the operations of MAF or multinational accounting firm. However, in a display of socialistic sentiments, the Institute of Chartered Accountants of India (ICAI) has taken an `important decision' at one of its recent meetings: that all firms are equal. Accordingly, there are no `small, medium and large' firms, it said, striking off a recommendation that a study group on `capacity building measures' had made in this regard.

This is not a happy development for those who are obsessed with size. However, the ICAI is pushing hard a different concept, `networking'. There is already an `informal network' in the form of `referral practice', the study group has reported; one wonders if the report talks of how much commission CAs charge on such referrals.

The Institute does not frown on `referral' because such a practice has been in existence "since long time in the nature of loose associations amongst the CA firms." But the ICAI is against calling the thing either informal or network. Perhaps, `informal' robs the profession of its formal image, or the word has grey association as in `informal economy'.

What about Indian firms that affiliate with a common MAF? They are all part of the same network, rules the ICAI, even if there is no relationship among the Indian firms inter se. Before this can unsettle the biggies, it has been said, "For these firms registration with the Institute is not ipso facto mandatory." There is a stipulation: "It is only if these Indian firms decided to exhibit to the outside world their collective strength and resources that registration with the Institute would be required." A weak catch, that is, for it is too remote that we'd see all the affiliates marching in unison, as a display of `collective strength'.

MAF does exist, but it is a term that the ICAI likes to keep undefined. A wordy definition is about `networking with entities outside India': "An entity under common control, ownership or management with the firm or having affiliation with an accounting entity or any entity which is held out as so affiliated or when a reasonable and informed third party having knowledge of all relevant information would reasonably conclude as being part of the firm nationally or internationally." One has to see how this definition works.

The concept of multi-disciplinary firms (MDFs) may take a while to come to fruition, because the earlier recommendation of the ICAI to the Government — that there be no prohibition for a CA to enter into partnership with other professionals for rendering professional services as permitted by the Council from time to time — got trashed when the CA Bill, 2003 was drafted. Current thinking in the Institute is to push for this relaxation, in a more liberal manner — that no separate firm is necessary for such multi ventures. Will these MDFs transform the staid accounting firm into a polyclinic of sorts with docs, lawyers, consultants, electricians, IT experts, actuaries, plumbers, engineers and cooks thrown in, to successfully offer an array of services to clients? It is all up to the ICAI's Council; it is empowered, it seems, "to recognise the qualifications for the purpose of entering into partnerships with other professionals." Meanwhile, there appears to be some confusion whether a practising CA can be the MD of a management consultancy company, without any specific permission from the Institute.

Networks can be LAN, WAN, SAN, and so forth, for the geeks. Not so when the Institute talks of CA networking. Thus, bean-counters can network in three ways: under the name of an existing firm, using a separate name, and without any name. The last option has the potential to push networks into informal zone, under the shelter of anonymity. "Network may have distinct name," advises the ICAI. To distinguish, the prescribed phrase is, `& Affiliates', and they can pool resources and "declare combined turnover, expertise, manpower and location."

What if things turn sour? There is escape available; firms can dissociate from the network by sending a declaration, without having to get the concurrence of other firms to such a move. There can be bad apples, in the form of disciplinary proceeding against any particular firm forming part of the network.

This will not affect the network, says the ICAI, though one can anticipate that for the outside world, network can be seen as not working when its nodes are in trouble. Apparently, it is not possible for the network to throw out a constituent who is afflicting the group.

More than capacity building, these developments bank on the confidence that more heads are better than a fewer. Also, a fond hope that if work is going to be the same old accounting thing, why not package it differently and offer better bandwidth?

AccountSpeak@TheHindu.co.in

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