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January 27, 2021

Govt to set up new laws for ICAI, ICSI and ICWAI

by CA Shivam Jaiswal in Circular and Notifications, Income Tax

Govt to set up new laws for ICAI, ICSI and ICWAI

The government is set to amend laws to streamline the functioning, especially the disciplinary aspects, of three professional institutes, namely the Institute of Chartered Accountants of India (ICAI), Institute of Cost and Works Accountants of India (ICWAI) and Institute of Company Secretaries of India (ICSI).

The Institute of Chartered Accountants of India (ICAI) is a statutory body established by an Act of Parliament, viz. The Chartered Accountants Act, 1949 for regulating the profession of Chartered Accountancy in the country. The Institute of Company Secretaries of India (ICSI) is the only recognized professional body in India to develop and regulate the profession of Company Secretaries in India. It is a premier national professional body set up under an act of Parliament, the Company Secretaries Act, 1980. The Institute of Cost Accountants of India, previously known as The Institute of Cost & Works Accountants of India, is a premier statutory professional accountancy body in India with the objects of promoting, regulating and developing the profession of Cost & Management Accountancy.

When will the amendment be brought about in the laws of these statutory bodies?

A bill to amend relevant provisions of laws governing the three bodies is expected to be introduced during the second half of the budget session of Parliament.

What led to the amendment in the laws of these statutory bodies?

  • The idea of the amendment is to step up oversight on the three bodies after a committee suggested several changes almost three years ago.
  • Some of the proposals have already been accepted and the legal changes are being undertaken in consultation with the institutes.
  • ICAI itself was open to changes in recent months and had sought to simplify the process in cases such as those where the Quality Review Board suggested disciplinary action against its members, who are chartered accountants.
  • The disciplinary track record of ICAI had come under the scanner a few years ago, with even Prime Minister Narendra Modi flagging it at the time of the launch of goods and services tax.
  • Subsequently, the role of auditors had come under scrutiny after the collapse of IL&FS and the government had set up the National Financial Reporting Authority to look at important cases.

What is the proposed amendment?

  • As part of the proposal, the government intends to have a say in the appointment of secretaries of the institutes and directors responsible for discipline of the professionals.
  • At one time, the ministry of corporate affairs, which is piloting the bill, was looking to appoint government officers in these roles
  • The committee headed by Meenakshi Dutta Ghosh, a former civil servant, had suggested that the disciplinary platform should be independent of the institute, while pointing out that the current mechanism needed to be revamped.

The Disciplinary Committee of ICAI awarded to punishments to CA’s in 78 cases

The Disciplinary Committee has been constituted by the Council of ICAI under Section 21B of the Chartered Accountants Act, 1949 so as to look into matters of professional misconduct by members which fall within the purview of Second Schedule or both First and Second Schedules to the Chartered Accountants Act, 1949. The Disciplinary Committee investigates and holds enquiries in respect of a complaint or Information against a member of the Institute, where the Council is prima facie of opinion that the member has been guilty of any professional or other misconduct. It also summons witnesses related to the case, enforcing their attendance and examining them on oath. It submits its Report of enquire to the Council of the Institute for its consideration and for award of punishment/making recommendation of punishment to the High Court.

During FY 2019-20, the Disciplinary Committee concluded its enquiry in 300 cases, which included cases referred to it in previous years. ICAI also reported that during the current year 2020-2021, a new bench of the Disciplinary Committee has been constituted and thus with the four Benches of the Disciplinary Committee i.e., Bench I, Bench II, Bench III and Bench IV and the Board of Discipline, it is expected to have an expeditious disposal of cases under inquiry apart from the consideration of the Prima Facie Opinion formed by the Director (Discipline). In addition, the Disciplinary Committee under Section 21D headed by the President, ICAI has also been constituted to look into any residual old cases that are/may be referred back by the Council.

What happens when a CA is found guilty of professional misconduct?

If the Director is of the opinion that the accountant is guilty of an act that falls under the First Schedule – then the complaint is forwarded to Board of Discipline. The Board of Discipline will follow a summary disposal procedure. If the member is found guilty of misconduct, the member will be given an opportunity to be heard and the following steps can be taken:

  • Reprimand the member
  • Remove his name from the Register for a period of up to 3 months
  • Impose any fine it may think as fit that extends up to one lakh

If the Director is of the opinion that the accountant is guilty of an act that falls under the Second Schedule or both Schedules – the complaint is forwarded to the Disciplinary Committee. If the member is found guilty of misconduct, the member will be given an opportunity to be heard and the following steps can be taken:

  • Reprimand the member
  • Remove his name from the Register for a period it may deem fit
  • Impose any fine it may think as fit that extends up to five lakhs

It is now to be seen that what effect would the same have when these positions are filled in by the Government.

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