Capacity Building of CA Firms
BY :CA AMRESH VASHISHT, FCA, DISA
Moderator,http://in.groups.yahoo.com/group/ICAI_CIRC_MEERUT_CA
The largest 25000 CA Members GROUP in the WORLD .
1 1 5, Chappel Street, Meerut Cantt, UP, INDIA.
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Present Scenario
 Over Dependence on Statute Based Audits
 Tax Audits
 Bank Audits
 Increased Cost of Attest Function
 Increasing Compliance with Technical Standards
 Stagnated Fees Structure
 Reduction in availability of Quality Human Talent
2
Have I asked these questions to myself ?
Has my firm identified its business goals for
2011 (and beyond)?
Am I prepared for changes due to DTC,
IFRS, Companies Act, GST, SAP?
Have I thought about my competitors and
how I might lose out my clients to them?
Have I developed any long-term strategy for
securing my position in the market?
3
3
Is there an increase in competition?
46500
TOTAL NO. OF FIRMS
46000
45500
45000
44500
44000
2005
2006
2007
2008
YEAR OF THE LIST OF FIRMS
4
2009
COMPOSITION OF PRACTISING UNITS IN
INDIA ( AS ON 1st APRIL,2010)
No of Partners
Western
Southern
Eastern
Central
Northern
Total
All
India
1 ie; proprietary
13216
4304
3272
4932
6277
32001
70.83%
2 TO 4
3489
2394
1069
2335
2269
11556
25.58%
5 TO 7
261
226
131
215
315
1148
2.54%
8 TO 10
64
87
50
54
105
360
0.80%
11 TO 13
28
18
10
15
26
97
0.21%
14 TO16
3
1
3
2
0
9
0.02%
17 TO 19
5
1
3
1
2
12
0.03%
Total
17066
7031
4538
7554
8994
45183
100.00%
5
Percentage
composition
Important Points to achieve your Vision
Invest time for Development
Realise your True Value
Identify what client needs, not push what
you have
Be Proactive, rather than being reactive
Position yourself appropriately
6
Important Points to achieve
your Vision
Specialise in One area
Value added Service, over compliance related
Quality of Deliverables
Invest in Knowledge domain, Technology &
Infrastructure
Be an Entrepreneur, prepared to Invest First
Revenue to profit Ratio ( 25 to 40% )
7
Small is Beautiful but big is beneficial
8
Who will Grow?
Honey Bee Hive
New age Polyclinic / Hospital
9
ICAI Initiative
Capacity Building
Measures 2005
Networking
Mergers
10
Management
Consultancy
Services
Companies
Net working of CA Firms
11
What do I gain by Networking or Merging?
Extending the base of
current offerings into new
markets or territories
Securing new customers
Acquiring complementary
capabilities
Leveraging efficiencies of
scale
12
12
Has Networking been Successful?
(AS ON April 2010)
Region
Network
Names
Approved
Networks
Registered with
the Institute
Total No. of
Firms in the
Registered
Networks
ERO
NRO
WRO
SRO
CRO
7
18
15
8
11
7
15
9
5
5
16
43
27
19
19
Total
59
41
124
13
What is the Concept of Net working?

Joining together of different CA firms with the object
of display of collective resources.

Each Firm to retain Independent Status

Network to act as facilitation and not to do business
on own.

Registration with ICAI.
14
What should I look for when Net working ?
Cost & time effective service
To satisfy the multi-locational clients
To Provide & accelerate multi-disciplinary services
Empowering the small firms
Consolidation of small & medium firms
Dissemination of Professional Expertise & Experience
Training & Sharing Methodologies
Networking will lead to Merger of Firms
15
What are the Guidelines of ICAI?


Can a Proprietor also join a network?
Proprietary/partnership firms as well as individual Members are
permitted to form a Network.

Can I join more than one Formal network?

Allowed to join only one Formal network.

Can we pool all the resources for pitching of work?
Can show combined strength of network members as a pool of
resources, expertise, manpower & location.
16
….What are the Guidelines of ICAI?

Who can sign the Report?
Only the firms forming Network are eligible to issue / sign / attest any
Certificate / Report / professional document / assignment.

Who will be liable for Disciplinary action?
In case of alleged violation of the provisions of the CA Act, Regulations
framed there under, guidelines/direction laid down by the Council from
time to time and Code of Ethics by the Network firm, the
proprietary/partnership firms/individual Member constituting the
Network would be answerable.
17
….What are the Guidelines of ICAI?

What are the Procedures for formation?
A declaration to be submitted in prescribed format.


Distinct name which should be approved by ICAI in accordance with the
guidelines.
To distinguish a “Network” from a “firm” of Chartered Accountants, the
words “& Affiliates” should be used after the name of the network and
the words “& Co.” /“& Associates” should not be used.
18
….What are the Guidelines of ICAI?

Can a Network Advertise?
Network is neither permitted to advertise(except as permitted for
members) nor to use logo and status quo as regards solicitation and
advertisement shall be maintained.


The firms constituting the network is permitted to use the words
“Affiliates/Members of ……..” (a formal network of Indian CA firms) on
their professional stationery.
Can I disassociate from the Network?
Firm may disassociate with network by sending the declaration and the
concurrence/acceptance by other firms of the network firm shall not be
required.
19
Are there any ethical compliances required?

Internal - Statutory Auditor relationship
cannot exist

Cap on Management Consultancy Fees

Rotation to be applicable where prescribed.
20
Mergers of CA Firms
21
INTRODUCTION TO MERGERS & DEMERGERS
In the Corporate world, merger and demerger have become
universal practices for securing survival, growth, expansion
and globalisation of enterprise and achieving multitude
objectives.
Merger is the fusion of two or more existing companies.
On the other hand, demerger signifies a movement in the
company just opposite to merger.
To incorporate the spirit of Corporate World and to imbibe
the consultation creed, probably the Council of ICAI used the
term `merger’ and `demerger’ of C.A. Firms.
22
Has Mergers been successful ? ( May 2010)
Region
Total
Merger
till date
Total No
of
Partners
as on
date
Total
No of
Prop
as on
date
Number of Firms
involved in
De Merger
(Active today)
Number of Firms
involved in Merger
(Active today)
Sole
Partner proprietary
Sole
Partner proprietary
Western
364
850
7
101
228
11
21
Southern
154
470
6
63
88
3
12
Eastern
179
511
5
41
114
10
22
Central
385
1045
11
86
306
15
51
Northern
470
1351
5
107
322
18
47
1552
4227
34
398
1058
57
153
TOTAL
23
STATUS OF MERGER / DEMERGER (as on May, 2010)
Share of CA Firms
32198
35000
30000
25000
20000
Value
13594
15000
10000
5000
43
1552
0
Network
Merger
Partnership
Firm
24
Proprietory
Firm
Mergers & Demergers
o Merger Agreement has to be filed with the
Institute within 30 days from the date of Agreement.
o The Reconstitution Agreement/Partnership Deed
shall be filed with the Registrar of Firms.
o After the merger of the firms, the Institute will
freeze the names of the merging firm and shall not
allot the same names to any other firm.
25
Advantages
 Pooling of resources – Expertise, Experience, Efficiency.
 Demand for one-stop-shop service can be met
 Capability to handle assignments of varying complexity and
dynamics
 Exposure to various clients builds confidence
 Risk bearing capacities increases
 Dependence on large clients reduces
 Professional standing improves/Helps to attract and retain talent
 Client servicing capabilities improves
 Ability to provide training
 Investment in technology/infrastructure
 Promotes specialisation
26
DOES ONE WANT SUCH A MERGER ?
27
What are the key factors holding back members from Merging?
 Meeting of mindset.
 Selection of firm – finding the right fit
 Lack of vision
 The merged entity losses its trade name and also seniority forever.
 Lurking fear that the relationship with the firm pre-merger may not
continue to be the same
 Reluctance to share specialization
 Conservative thinking
 Difficulty in trusting the other professional’s competencies
28
Success
…Do’s
 Remove I from our minds and think for WE
 Senior / Junior concept must be redefined
 Sourcing & Execution must be the core areas
 Purpose of Merger should not be only for PSU / Bank
Work
 Private Sector Opportunities should be tapped
 Rules for Admission & Retirement of Partner must be defined
29
Merger
Models of Merger
We could have three models
• Model I
: Profit Centre
• Model II : Pool Centre
• Model III : Responsibility Centre
30
COMPOSITION OF PARTNERS IN CA FIRMS (AS ON July 1st 2010)
ICAI DATA ANALYSIS-Partner/ Prop. As on I st July 2010
Partner Counts
Proprietor 1
Partner 2
Partner 3
Partner 4
Partner 5
Partner 6
Partner 7
Partner 8
Partner 9
Partner10
Partner 11
Partner 12
Partner 13
Partner 14
Partner 15
Partner 16
Partner 17
Partner 18
Partner 19
Partner 20
Total
Western
13371
2363
848
318
154
90
50
30
21
20
13
11
8
9
4
1
3
10
17324
South
4488
1626
536
242
107
69
49
39
33
25
18
7
2
2
0
0
1
0
1
3
7248
Central
North
4898
1443
632
218
146
78
51
36
20
13
7
5
4
2
0
1
0
3
0
0
7557
6454
1475
615
299
200
92
84
58
49
26
19
10
1
1
3
0
1
0
1
1
9389
31
East
3359
709
278
118
85
36
34
26
15
13
7
2
3
3
5
4
1
0
4
1
4703
Total
32570
7616
2909
1195
692
365
268
189
138
97
64
35
18
17
12
5
3
4
9
15
46221
Percentage
70.46%
16.47%
6.29%
2.85%
1.49%
0.78%
0.57%
0.40%
0.29%
0.20%
0.07%
0.02%
0.07%
0.03%
0.02%
0.01%
0.01%
0.01%
0.01%
0.03%
100.00%
Year Wise Growth Of Prop. & Partnership Firms(2005 to 2010)
Growth of Proprietory Firms
Growth of Partnership Firms
32800 32697
13800 13675 13753
13594
32600
13600
32000
32198
32165
32200
31950
13439
32001
Value
31871
VALUE
Value
32400
13400
13200
13209 13179
31800
13000
31600
12800
31400
2005 2006 2007 2008 2009 2010
2005 2006 2007 2008 2009 2010
Year
YEAR
32
Value
Future of SMP Firms
Limited Empanelment based work
Limited growth opportunity in Statute based work
Increased compliance requirements
Availability / Retention of human resources
CPE – New developments/updates
Technology updation
Super Specialisation
Value adds – gaining more importance
Networking / Merger
33
If we don’t act now, is this the Future?
34
Members interesting for PRACTICE IN CORPORATE FORM
A Chartered accountant in practice can
practice in corporate form. the Council at its
261st meeting held in August 2006 permitted the
Chartered Accountant in practice to practice in
Corporate Form subject to compliance of
Guidelines for Practice in Corporate Form.
35
What is Management Consultancy Company?
 Management Consultancy Company means a
Company which complies with the Guidelines for
Practice in Corporate Form issued by the Institute. A
Chartered Accountant in practice in corporate form
thus can run a Management Consultancy Company.
This Management Consultancy Company shall have a
distinct name which shall be approved by the
Institute. The prescribed format of application for
approval of name for Management Consultancy
Company is Form G
36
Can a practicing chartered accountant run a Company in addition to
his/her proprietary/partnership professional firm?
- Yes he can operate both the entities simultaneously. The
Council at its 261st meeting held from 1st to 3rd August 2006
decided to allow members in practice to hold the office of
Managing Director, Whole-time Director or Manager of a
body corporate within the meaning of the Companies Act, 1956
provided that the body corporate is engaged exclusively in
rendering “Management Consultancy and Other Services”
permitted by the Council in pursuant to Section 2(2)(iv) of the
Chartered Accountants Act, 1949 and complies with the
conditions(s) as specified by the Council from time to time in
this regard. The guidelines in this regard have been issued w.
e. f. 01.10.2006.
37
What kind of services can be provided through Management Consultancy
Company
 Management Consultancy & Other Services permitted by the
Council in pursuance to Section 2(2)(iv) of the Chartered
Accountants Act, 1949. The definition of the expression
“Management Consultancy and other Services” as appearing
at pages 8-10 of Code of Ethics, 2005 edition, is as under:

 The expression “Management Consultancy and other
Services” shall not include the function of statutory or
periodical audit, tax (both direct taxes and indirect taxes)
representation or advice concerning tax matters or acting as
liquidator, trustee, executor, administrator, arbitrator or
receiver, but shall include the following:

38
WORK , WHICH CAN BE UNDERTAKEN? A
 Financial management planning and financial policy determination.
 Capital structure planning and advice regarding raising finance.
 Working capital management.
 Preparing project reports and feasibility studies.
 Preparing cash budget, cash flow statements, profitability statements,
statements of sources and application of funds etc.
 Budgeting including capital budgets and revenue budgets.
 Inventory management, material handling and storage.
 Market research and demand studies.
 Price-fixation and other management decision making.
 Management accounting systems, cost control and value analysis.
 Control methods and management information and reporting.
 Personnel recruitment and selection.
39
WORK , WHICH CAN BE UNDERTAKEN? B
 Setting up executive incentive plans, wage incentive plans etc.
 Management and operational audits.
 Valuation of shares and business and advice regarding amalgamation,
merger and acquisition.
 Business Policy, corporate planning, organisation development, growth
and diversification.
 Organisation structure and behaviour, development of human resources
including design and conduct of training programmes, work study, jobdescription, job evaluation and evaluation of work loads.
 Systems analysis and design, and computer related services including
selection of hardware and development of software in all areas of
services which can otherwise be rendered by a Chartered Accountant in
practice and also to carry out any other professional services relating to
EDP.
40
WORK , WHICH CAN BE UNDERTAKEN? C
 Acting as advisor or consultant to an issue, including such matters as:  (a)
Drafting of prospectus and memorandum containing salient features of prospectus.
Drafting and filing of listing agreement and completing formalities with Stock Exchanges,
Registrar of Companies and SEBI.

(b) Preparation of publicity budget, advice regarding arrangements for selection of (i) admedia, (ii) centres for holding conferences of brokers, investors, etc., (iii) bankers to issue, (iv)
collection centres, (v) brokers to issue, (vi) underwriters and the underwriting arrangement,
distribution of publicity and issue material including application form, prospectus and brochure
and deciding on the quantum of issue material (In doing so, the relevant provisions of the Code
of Ethics must be kept in mind).
 (c)
Advice regarding selection of various agencies connected with issue, namely Registrars
to Issue, printers and advertising agencies.
 (d)
Advice on the post issue activities, e.g., follow up steps which include listing of
instruments and despatch of certificates and refunds, with the various agencies connected with
the work.
 Explanation: For removal of doubts, it is hereby clarified that the activities of broking,
underwriting and portfolio management are not permitted.
41
WORK , WHICH CAN BE UNDERTAKEN? D
 Investment counseling in respect of securities [as defined in the Securities
Contracts (Regulation) Act, 1956 and other financial instruments.] (In doing
so, the relevant provisions of the Code of Ethics must be kept in mind).
 Acting as registrar to an issue and for transfer of shares/other securities.
(In doing so, the relevant provisions of the Code of Ethics must be kept in
mind).
 Quality Audit.
 Environment Audit.
 Energy Audit.
 Acting as Recovery Consultant in the Banking Sector.
 Insurance Financial Advisory Services under the Insurance Regulatory &
Development Authority Act, 1999, including Insurance Brokerage.
42
Benefits that are available to members if member opts for corporate
practice.
 i) The member can retain full time Certificate of Practice
besides being the Managing Director/Whole-time
Director/Manager of Management Consultancy Company.
 ii)
The member will be entitled to train articled/audit assistant(s).
 iii) There will be no restrictions on the quantum of the equity
holding of the member, either individually and/or along with his
relatives, in such a company.
43
Opportunities – PD Portal
44
Opportunities – CA Net ICAI Facilitation
45
Tool kit with ready to use Checklists & templates
46
First Release of Check-lists and Templates
Audit Manual for Small Entities
Standards On Auditing
Accounting Standards
Practice Management
Income Tax
Tax Audit
CARO
Service Tax And Central Excise
Bank Branch Auditing
Many More to Come
47
Main Slide
General Audit Programme
Audit Manual for Small Entities
48
Audit Program: Intangible Assets
Audit Manual for Small Entities
49
AS - 2 - Valuation Of Inventories
Checklist For Accounting Standards
50
Clausewise Checklist For Form No.3 C D
Tax Audit
51
Tax Audit Report With Annexures
Tax Audit
52
Checklist & Templates
Main Slide
CARO Checklist
Checklist for CARO
53
L F A R Checklist
Checklist For Bank Branch Audit
54
Checklist & Templates
Main Slide
SA 300 (Revised) Planning An Audit...
Checklist For Standards On Auditing
55
Special Scheme for Transfer Pricing
56
Special Financial Scheme for CA’s
57
!!! Thank You CALCUTTA !!!
धन्यवाद
09837515432
amresh_vashisht@yahoo.com
58