The government will likely notify the National Financial Reporting Authority, a regulator for chartered accountants (CAs), in January as it gets serious about efforts to crack down on financial crimes including money laundering.
Minister of state for corporate affairs PP Chaudhary said in a written reply to the Lok Sabha on Friday that “in addition to the self regulation mechanism existing within the ICAI framework, there is need for an independent regulator... to oversee compliance with accounting and auditing standards and for oversight of audit professionals.”
The Institute of Chartered Accountants of India says that the existing framework is “adequate” and that there is no need for a new body.
“The present system under the disciplinary committee of ICAI is robust. We have already brought down the pendency of cases from seven years to three years as of July 2017. The setting up of NFRA will lead to duplicity and confusion among stakeholders. Our focus should be strengthen existing bodies rather than replicating them,” said Nilesh Vikamsey, president, ICAI. He cited the opinion of the standing committee of finance in 2016 against setting up the NFRA, to buttress his argument. According to ICAI, till 20 December, a total of 1583 cases were pending before it and at different stages.
“We realised that the track record of ICAI in taking disciplinary action against CAs was poor. Penalties have been trivial and probes have been significantly delayed,” said a government official familiar with the matter who asked not to be identified. Once set up, the NFRA can initiate probes against CAs, auditors and audit firms. Headquartered in New Delhi, the authority will have equivalent powers of a civil court can impose penalties on erring CAs, disbar them, even recommend criminal proceedings.
{{/usCountry}}“We realised that the track record of ICAI in taking disciplinary action against CAs was poor. Penalties have been trivial and probes have been significantly delayed,” said a government official familiar with the matter who asked not to be identified. Once set up, the NFRA can initiate probes against CAs, auditors and audit firms. Headquartered in New Delhi, the authority will have equivalent powers of a civil court can impose penalties on erring CAs, disbar them, even recommend criminal proceedings.
{{/usCountry}}Sources said that provisions are likely to be made to allow NFRA to impose penalties of at least Rs 1 lakh which may extend up to five times of the fees received in case of individuals and not less than Rs 10 lakh which may extend up to ten times of the fees received in case of firms.
It can disbar any CA or a firm from practice for a minimum period of six months which can extend up to 10 years.
“NFRA will become the umbrella regulator for CAs, cost accountants and company secretaries. The branding and image of the profession will increase given that a transparent regulator will now regulate it,” said Sanjay Gupta, president, Institute of Cost Accountants of India.
Earlier this year, the government raised concerns as over 1400 complaints against CAs were pending and data showed that only 25 CAs have been punished in the past 10 years.
During his interaction with chartered accountants in July, soon after the implementation of the Goods and Services Act, Prime Minister Narendra Modi stressed n the need to improve the disciplinary mechanism in the profession.
“We are increasingly seeing that money is being laundered through financial institutions in India using shell companies and real estate. In this matter the role of CAs cannot be ruled out,” said a top officer in the Enforcement Directorate. Asking not to be identified, this person added that the matter has also been highlighted in the meeting of the task force created for cracking down on shell companies.
(PTI contributed to this report)