The Hindu Business Line : Coming soon: Guidance Note on Accounting of VAT

FELICITATION functions are fertile occasions for flattery and flippant promises, and so nobody expects any truth to be told. That, the new president of the Institute of Chartered Accountants of India, Kamlesh S. Vikamsey, would have known by now, with more than a month wearing off ever since he took charge.

His first message, as posted on www.icai.org, reports that the International Federation of Accountants (IFAC) is "in full favour of unhindered movement of accounting professionals" and that it is also working with leading world bodies such as the World Bank and other regulators to establish best practices in the accountancy profession.

Apparently, this is not the full story; because news reports of last month on the joint press meet of the IFAC and the ICAI noted that Graham Ward, president of the IFAC, said, "We no more want to see barriers for carrying out work in India".

Ward had insisted then that there should be freedom of establishment of professional services firms in the country, and that issues such as restrictions on the name of the firms need to be sorted out before foreign firms could freely carry out professional work here.

Ironically, Ward was here "at the invitation of the Institute", as perhaps a good use of membership and students' money.

And so it sounds, therefore, polite enough when the host body is happy that the interaction with the dignitaries "not only helped in underlining role of accounting profession in India in the emerging context but also enabled exchange of perspective that we have for contribution in the development of the capital market, banking sector and global market for accounting services."

Vikamsey adds that the IFAC honcho advocated "a greater role of the accountancy profession in India in the international arena."

Wishful thinking, indeed, because Ward was marching to a different drummer, even as what had been put up before the media by the Institute was one more instance of flogging the level-playing logic, with demands for reciprocal arrangement for domestic accountants and Indian firms in other countries.

One learns that David Tweedie, Chairman of the International Accounting Standards Board (IASB), sees "a larger role for the Institute in global convergence of accounting standards and their effective implementation" and that "he has agreed to visit India and have dialogue with the Institute and other authorities during the course of the year." Wishing the guest happy convergence and nice sightseeing, we can move on to the immediate agenda of the ICAI.

Will VAT be the Promised Land, we don't know, but the ICAI is on overdrive: "Guidance Note on Accounting of Value Added Tax is likely to be released soon".

Simultaneously, the Institute is going to launch `chain seminars' across the country for VAT. "The effectiveness of the Value Added Tax lies in its successful implementation after making the trade and industry aware of all the finer elements of the new system and allaying any misapprehension," asserts Vikamsey.

And there are other bogies to pull. Such as: bringing out `Technical guide for inspection of investment function of insurance companies', evolving guidelines for assessing internal controls for the purpose of certification by CEOs and CFOs as envisaged in the revised Clause 49 of the Listing Agreement, promoting its new `Study on money laundering' to give guidance to CAs, pushing a bit harder the pedal on Peer Review, participating in Rajasthan's Budget discussions, organising training programmes on `emerging areas' (such as SOX, BPO, International Financial Reporting Standards, and so on), researching into "the extent of implementation of Accounting Standards and the assessment of impact of Accounting Standards on capital markets", setting up of IT Labs, and issuing e-newsletter for overseas members.

Shall we say, cheerful chugging along?

Bookkeeping quiz

TRY this short quiz that the American Institute of Professional Bookkeepers (www.aipb.org) has sent in its newsletter called The General Ledger: "Expenses found after the books are closed are (debited/credited) to Retained Earnings. If Stockholders' Equity (SE) is 90 per cent Contributed Capital, SE probably came mostly from (investors/profits). Can employees stop paying into a 401(k)?

"Can you pay part-timers for only part of a holiday when your firm is closed? `CBD' in a contract or on an invoice stands for _____ _____ _____. When capitalising an asset, do you include the sales tax? If a part-timer who works for you also has a full-time job with another employer, should you withhold FICA tax? Does federal law require you to include paid vacation in overtime computations?"

Take heart, I'm not going to check your answers!

Audit under pressure

THERE'S a mail from an irate CA that there are objectionable lines in the bank audit appointment letter that he has received. "Please complete the audit positively on or before April 7, 2005, as any delay in completion of audit within the stipulated date would be viewed seriously and also be brought to the notice of the RBI," is one paragraph, while another reiterates the threat: "Audit should be completed expeditiously and audit report should reach us within three days from the date of completion of the audit of a branch. Inordinate delay in receipt of reports will be viewed with concern and where required, may be reported to the RBI."

The correspondent is upset on one more count that the bank is teaching him some basics, such as materiality:

"In order to report the changes, if any, to be made in the Branch Accounts, we have the following reporting formats called MOCs (Memorandum of Changes).

"Branch auditors are also requested to take into account the materiality while suggesting MOCs, and not to press for MOCs, in respect of issues which are neither material nor significant."

An objection that is both material and significant, shouldn't we tell the RBI?

Phir bhi FRRB

SUNIL Talati, who heads the Financial Reporting Review Board (FRRB) of the ICAI, is on the prowl once again this year with a wider agenda.

Last year his team had run a random sieve on companies, selected 25 for study, found 22 to be okay, and of the balance three, one has been referred to the disciplinary section of the Institute, while on the rest two, the Department of Company Affairs has been kept posted.

This year, the Board has a `special' randomiser and 125 companies have been put under the lens. There's added strength for the Board's `review groups'.

Talati says that there is a Chinese wall between the council and the Board.

Though he wouldn't tell us the name of the companies, he concedes that there are patent errors, and instances of financial engineering such as fraudulent transfers from reserve to pay dividend, and converting of loss into profit.

I guess nobody is telling Talati, "Phir bhi, they're our members, Sunil!"

AccountSpeak@TheHindu.co.in

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