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Wednesday, Jan 12, 2005

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With ICAI amending MCS definition — CAs can render financial insurance advisory services

K.R. Srivats

New Delhi , Jan. 11

PRACTISING chartered accountants (CAs) have been provided with another avenue for rendering services under the management consultancy services (MCS) space.

The Central Council of the Institute of Chartered Accountants of India (ICAI) has amended the definition of the expression "Management consultancy and other services" under the Code of Ethics to include "Financial Insurance Advisory Services under the Insurance Regulatory and Development Authority Act 1999 including insurance brokerage."

Sources said the move comes with the ICAI in the process of changing its regulations to allow CAs in practice to render MCS under a corporate form of organisation without any strings attached.

Currently, the services rendered by chartered accountants can be classified into two categories: attest services and pleadings before taxation and other government authorities, and management consultancy services.

An ICAI study group on `capacity building' in Indian CA firms had recently held that it is "always desirable" that both categories of services are rendered by ICAI members in professional firms as chartered accountants. At the same time, it had also noted that many of the members are keen to form companies for rendering MCS.

The ICAI regulations currently provide that members becoming working directors in such companies would be required to surrender their certificate of practice.

The study group report had also noted that members could alternatively convert their certificate of practice into part-time practice. But they would be barred from training CA students. With effect from April 1, they would not be able to undertake the attest function and also they cannot hold more than 20 per cent equity along with their relatives in such companies.

To remove the impediments faced by members who are keen to engage in MCS in corporate form, the ICAI study group on capacity building of Indian CA firms recently recommended a set of conditions that need to be complied with by members desirous of becoming managing director/whole-time working director in companies rendering MCS.

One of the conditions spelt out is that the company should give an undertaking that it would render only those MCS that are prescribed by the ICAI council.

The study group had held that compliance with the conditions would enable the members to retain full-time certificate of practice besides being the managing director or whole-time director of such a company. Further, the member would be entitled to train articled/audit students and there will be no restriction on the quantum of equity holding of the member, either individually or along with his relatives, in such a company. Members would also be allowed to carry out the attest function.

Even as the ICAI council has in principle accepted the recommendations of the study group, the sources said the "modalities for implementation" on allowing CAs to render MCS under corporate form are being worked out.

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