J. B. Nagar CPE Study Circle of
WIRC of ICAI
Capacity Building
Practical Aspects
CA Niranjan Joshi
23rd December 2012
Andheri - Mumbai
Restriction on Disclosure and Use of Data
The data in this document contains trade secrets and confidential or proprietary information of SARDA & PAREEK,
Chartered Accountants, the disclosure of which would provide a competitive advantage to others. As a result, this
document shall not be disclosed, used or duplicated, in whole or in part, for any purpose other than to evaluate SARDA &
PAREEK. The data subject to this restriction are contained in the entire document.
Disclaimer
These are my personal views and can not be
construed to be the views of the ICAI or my firm.
No representations or warranties are made by the
WIRC
with
regard
to
this
presentation
These views do not and shall not be considered as a
professional
advice.
This presentation should not be reproduced in part or
in whole, in any manner or form, without our written
permission.
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Present Scenario
 Over Dependence on Statute Based Audits
 Tax Audits, VAT Audit,
 Bank Audits, Company Audit, PSU audit
 Increasing Competition within Profession
 Increased Cost of Attest Function
 Increasing Compliance with Technical Standards
 Stagnated Fees Structure
 Reduction in availability of Quality Human Talent
 Increased compliance requirement
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Questions for us
 Has my firm identified business goals (2013 and
beyond)?
 Have we developed long-term strategies for
securing our position in the market?
 Have we thought about competition?
 Have we thought about growing compliance
requirements (DTC, IFRS, GST, Companies Act,
SAP)?
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The Changing Scenario
 The
Business
Environment
characterized by “Change”.
today
is
 Economies, Markets, Industries and Companies
are being transformed for ever.
 Convergence has blurred Industry structures.
 The definition of competition has changed for
ever.
Its time to re define our strategies
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Clients Expectation from Practice Units

Experience, Expertise and Efficiency

Multi – location presence

One Stop Solution

Size / Back up / Team / Alternatives

Capacity Building
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Does the size Matters?
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ICAI – Capacity Building Measures
Capacity Building
Measures 2005
Networking
Mergers
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Management
Consultancy
Services
Companies
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Capacity Building

Reading & Research Development

Specialization / Expertise

Sharing Resources / Knowledge Pool

Human Talent

Infrastructure, Mkt Requirement / Challenges

Ability to Handle Complex /diverse areas

Ability to Handle Volume assignments

Ability to reach across state / country
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Concept - Capacity Building For CA Firms
Story of Hare & Tortoise
Fast and Consistent will always beat the slow
and steady
Work to your competencies
Pooling resources and working as team will
always beat individual performers
Never give up when faced with failure
Compete against situation not against rival
Be STRATEGIC
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Important Points to Achieve VISION
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Invest time for development
Realise your true value
Identify what client needs
Be proactive, rather than being reactive
Position yourself appropriately
Specialise in one area - Value added service,
over compliance related
Invest in knowledge domain, technology &
infrastructure
Be an entrepreneur, prepare to invest first
Determine Revenue to Profit Ratio first
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ICAI – Capacity Building Measures
 Networking of CA Firms
 Merger of CA Firms
 Corporate form of Practice
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Concept of Networking
Honey Bee Nest
Polyclinic
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Concept of Networking of CA Firms
A & Co
A&
Affiliates
B&
Associates
CD & Co
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Concept
 Joining together of CA firms with the objective
of displaying collective resources.
 Each firm to retain independent status
 Network to act as facilitation and not to do
business on own
 Registration with ICAI
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Objective
 To capture the emerging opportunities of
globalization
 To achieve the sustainable growth
 To create large firms which are able to provide
services to larger organization
 To provide ‘One Stop Shop’ in prevailing
competitive global service market.
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What should I look for when Networking?
 Geography / Location
 Specialisation / Expertise
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Roadmap
 Identifying Firm/ Members
 Meeting of Minds
 Presentation by all the members identifying
their Strengths / Weaknesses / Resources /
Clients / Financials / Area of Interest / Ideas
 Discussion on Vision
 Commonality of Goals / Objectives
 Agreement – Roles and Responsibilities
 Income Sharing
 Trial Period not more than 3 years
 Successful Implementation
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ICAI Guidelines
 Can a Proprietor join a network?
 Proprietory / Partnership as well as individual
members are allowed to join network
 Can I join more than one network?
 Allowed to join only one Formal network
 Can we pull all the resources for pitching for
work?
 Can show combined strength of network
members as a pool of resources, manpower,
expertise and location
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ICAI Guidelines
Who can sign the report?
Only the firms forming network are eligible to
issue / sign / attest any Certificate / Report /
professional Document / Assignment.
What are the procedures for formation of
network?
Declaration to be submitted in prescribed
format
Distinct name is approved by ICAI
& Affiliates should be used as suffix instead of &
Co or & Associates
Ethical compliance is must
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Contents

Networking of CA Firms
 Merger of CA Firms
 Corporate Form of Practice
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Merger
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Background
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Recommendation Naresh Chandra Committee
Legal Limitations- Partnership Act, 1932
Limited Liability Partnerships (LLP)
Merger to precede Demerger
Formal Documentation of Merger
Demerger to be recognised
Demerger to be in built in Merger
Demerged Entity to be entitled to Same Name
Restoration of Seniority possible
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Concept
 Merger of CA firms in One Partnership Firm
with the objective of displaying collective
resources.
 Only One Firm remains in existence
 Firm will work on its own and carry out
business of its own (not merely facilitation)
 Registration with ICAI / Partnership Deed
 Objective and Roadmap similar to Networking
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Contents
 Networking of CA Firms
 Merger of CA Firms
 Corporate Form of Practice
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Concept
■ Permitted by ICAI w.e.f. 1st October 2006
■ Permitted Practicing CA’s to render Management
Consultancy and Other Services by issuing guidelines
for practice in Corporate Form.
■ Management Consultancy Company (MCC) shall
restrict itself only to Management Consultancy and
Other Services permitted by the council in pursuance
to section 2(2)(iv) of the Chartered Accountants Act,
1949.
■ The object clause shall restrict itself to such services
only and an undertaking to that effect shall be given
by such company.
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Corporate Form of Practice Statistics
■ All provisions of the Companies Act, 1956 and
other laws are applicable to a company formed
under the act shall be applicable to MCC
■ MCC not permitted to advertise, not to use logo.
■ Members to retain full time COP besides being
Managing Director / Whole Time Director of MCC
■ Member continue to train Article / Audit Assistant
■ No restriction on quantum of equity holding of
member either individually or with relatives in
such company.
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Corporate Form of Practice Statistics
■ MCC shall apply for name approval Form ‘G’
■ Name to indicate area of “Management
Consultancy & Other Services”
■ After name approval registration with ICAI in
Form ‘H’
■ Ethical compliance is must
■ Notification No. 1-CA(7)/60/2002 dated 8th March
2002 regarding ceiling on Non-Audit Fees is
applicable in relation to MCC
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Practical Issues – Capacity Building
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Lack of awareness
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Financial Constraints
Lack of Guidance
Sharing of Resources (Infrastructure,
Competency, Human Resources)
Conflict of interest
Less control over work carried out by other
affiliates of the Network
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Practical Issues – Capacity Building
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Appointment, Powers & Functions of the
Managing Committee of the Network
Administration / Operating Procedures of
Network
Contribution of membership fees to meet
administration cost of the Network
HR Policies
Dispute settlement procedure
Identifying ‘Engagement Partner’ to be
responsible for assignments of the Network
Issuing training materials, newsletters etc. to
affiliates of the Network
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Practical Issues – Capacity Building
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Common library for the member firms
Appointment of Technical Director to make
references
Peer Review of the member firms
Determine methodology for drawing resources
from each member firm
Compensation to member firms for resources to
be drawn from them
Development of software, database etc. for
member firms.
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Objectives of Merger
 Fusion of two or more existing CA firms to:
∞
∞
∞
develop core competencies
to render professional services of a large range
spread over bigger geographical area.
∞
∞
to enable conversion of small to medium firms
to enable conversion of medium to large firms.
 To make provision for the growth engine:
 Expansion of Client base of the practicing units
 Enhance the group profitability in long term
 A merged big entity will always be superior to a
network arrangement.
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Advantages of Merger
 As a growth engine Merger of CA firms enables
growing firms in conversion of small firms to
medium firms and medium firms to large firms.
 Merger provides with the firms a competitive
edge to capture opportunities arising out of
globalization.
 Merger enables consolidation of experience ,
expertise,
manpower,
financial
and
infrastructure resources thereby leading to
creation of large firms which are able to deliver
one stop shop.
 Risk bearing capacity increases.
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Advantages of Merger
Ability to provide training
Investment in technology/infrastructure
Promotes specialisation
Dependence on large clients reduces
Capability to handle assignments of complexity
and dynamics
 Merger is an alternative for growing firms as a
growth engine
 Expansion of Client base of the merged firm
 Enhance the group profitability in long term





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Limitations of Merger
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Selection of firm – finding the right fit
Lack of vision
The merged entity losses its trade name
The Merged Entity loses its 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
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Future of SME Firms
 Limited empanelment based work
 Limited growth opportunity in statute based
work
 Increased compliance related work
 Availability / retention of human talent
 CPE – New Developments / Updates /
Technology
 Specialisation
 Value adds gaining more importance
 Networking & Merger is must
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If we don’t act now?
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DO’s
 Remove I from our minds and think for WE
 Senior / Junior concept must be redefined
 Sourcing & Execution must be the core areas
 Merger should not be only for PSU / Bank Work
 Private Sector Opportunities should be tapped
 Admission & Retirement of Partner must be
defined
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Dont’s
 Total
power should not be put a single
partner/individual
 Multiple power centers /processes should be
avoided
 Avoid creating immoveable properties
 No ambiguity regarding key areas such as
 sharing of profits,
 responsibility,
 retirement & admission of partners
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Professional Opportunities
International Financial Reporting Standard
- Employment
- Audit Assignments
- Consultancy
Banks and Financial Sectors
Public Sector Assignments
Tenders
MNCs in India & Indian MNCs Abroad
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ICAI – PDC Portal
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ICAI – Networking Portal – www.caconnecat.co.in
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ICAI Capacity Building Initiative
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Conclusion
There is a difference
between an objective and
actions.
Unless
you
understand your objective,
you will be wasting your
time in actions. Know
your objective first.
-Swami Vivekananda
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Conclusion
“Take Risks in your life”
- If you win, you can lead,
- If you loose, you can
guide.
-Swami Vivekananda
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Questions???
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!!! Thanks !!!
CA Niranjan Joshi, B.Com., FCA, DISA (ICAI)
Email: nvjca1@gmail.com
Cell: 9819078061
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