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Capacity Building of CA Firms BY :CA AMRESH VASHISHT, FCA, DISA

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 .

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Capacity Building of CA Firms BY :CA AMRESH VASHISHT, FCA, DISA

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  1. Capacity Building of CA Firms BY :CA AMRESH VASHISHT, FCA, DISA Moderator,http://in.groups.yahoo.com/group/ICAI_CIRC_MEERUT_CAThe largest 25000 CA  Members GROUP in the WORLD . 1 1 5, Chappel Street, Meerut Cantt, UP, INDIA. Phone: 0 1 2 1-2 6 6 1 9 4 6. Cell: 9 8 3 7 5 1 5 4 3 2. FOLLOW    http://twitter.com/caamreshADD    http://www.facebook.com/amresh.vashisht

  2. 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

  3. 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

  4. Is there an increase in competition?

  5. COMPOSITION OF PRACTISING UNITS IN INDIA ( AS ON 1st APRIL,2010)

  6. 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

  7. 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% )

  8. Small is Beautiful but big is beneficial

  9. Who will Grow? Honey Bee Hive New age Polyclinic / Hospital

  10. ICAI Initiative

  11. Net working of CA Firms

  12. 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

  13. Has Networking been Successful? (AS ON April 2010)

  14. 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.

  15. 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

  16. 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.

  17. ….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.

  18. ….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.

  19. ….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.

  20. Are there any ethical compliances required? • Internal - Statutory Auditor relationship cannot exist • Cap on Management Consultancy Fees • Rotation to be applicable where prescribed.

  21. Mergers of CA Firms

  22. 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.

  23. Has Mergers been successful ? ( May 2010)

  24. STATUS OF MERGER / DEMERGER (as on May, 2010)

  25. Mergers & Demergers • Merger Agreement has to be filed with the Institute within 30 days from the date of Agreement. • The Reconstitution Agreement/Partnership Deed shall be filed with the Registrar of Firms. • 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.

  26. 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

  27. DOES ONE WANT SUCH A MERGER ?

  28. 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

  29. 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

  30. Merger Models of Merger We could have three models • Model I : Profit Centre • Model II : Pool Centre • Model III : Responsibility Centre

  31. COMPOSITION OF PARTNERS IN CA FIRMS (AS ON July 1st 2010) ICAI DATA ANALYSIS-Partner/ Prop. As on I st July 2010

  32. Year Wise Growth Of Prop. & Partnership Firms(2005 to 2010)

  33. 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

  34. If we don’t act now, is this the Future?

  35. 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.

  36. 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

  37. 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.

  38. 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:

  39. 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.

  40. 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, job-description, 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.

  41. 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) ad-media, (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.

  42. 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.

  43. 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.

  44. Opportunities – PD Portal

  45. Opportunities – CA Net ICAI Facilitation

  46. Tool kit with ready to use Checklists & templates

  47. 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 Main Slide

  48. General Audit Programme Audit Manual for Small Entities

  49. Audit Program: Intangible Assets Audit Manual for Small Entities

  50. AS - 2 - Valuation Of Inventories Checklist For Accounting Standards

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