Networking, MDPs, Office Management & Practice Development Strategies for Chartered Accountants

1. Networking, MDPs, Office Management & Practice Development Strategies for Chartered Accountants CA ATUL C. BHEDA MUMBAI Bcom, FCA, LLB(gen), DISA(ICA) BY CA ATUL BHEDA Mumbai For Malad Goregaon CPE Study Circle

2. COMPOSITION OF PARTNERS IN CA FIRMS (AS ON July 1st 2010)

3. COMPOSITION OF PARTNERS IN CA FIRMS (AS ON July 1st 2010)

4. COMPOSITION OF PRACTISING UNITS IN INDIA( AS ON 1st July 2010)

5. ICAI’S INITIATIVES FOR CAPACITY BUILDING GUIDELINES FOR NETWORK RULES FOR MERGER-DEMERGER PRACTICE IN CORPORATE FORM mdPS

6. ICAI RULES ON NETWORKING MREGER DEMERGER

7. NETWORKING • NAME FOR NETWORKING • REGISTRATION • EHICAL COMPLIANCE • CONSTITUTION • SCOPE • BYELAWS • EXIT

8. NAME FOR NETWORKING • The Network may have distinct name, which should be approved by the Institute. To distinguish a “Network” from a “firm” of Chartered Accountants, the word “& Affiliates” should be used after the name of the network and the words & Co.” / “& Associates” should not be used. The prescribed format of application for approval of Name for Network is asper the Form ‘A’.

9. REGISTRATION • Formal Network is required to be registered with the Institute as per the prescribed Form B • The Referral Practice requires no registration

10. Ethical Compliance • It will be necessary for the networked firms to comply with all applicable ethical requirements prescribed by Institute • one firm of the network is the statutory auditor of an entity then the associate firm should not accept internal audit or book keeping • The ceiling of charging non audit fees i.e. three times of the statutory audit fees is collectively applicable in relation to the networking firms

11. Constitution • The Network can be between proprietary, partnership firms and individual members. A proprietory, partnership firms and individual members are allowed to join only one formal network. Firms having common partners shall join only one network.

12. Scope • The Network itself will not carry on any business for acquisition of gain for itself and only act as a facilitator for its members/constituent Member firms to pursue their professional jobs • Only one Firm/Member can apply on behalf of the network showing the collective strength • Only the firm/Member of Network can sign/attest any certificate/Report.

13. Byelaws • Appointment of a Managing Committee, from among the managing partners of the member firms of the network and the terms and conditions under which it should function. The minimum and maximum number of members of the Managing Committee shall also be agreed upon. • Administration of the network • Contribution of membership fees to meet the cost of the administration of the network.

14. BYELAWS…… • Identifying a partner of any of the member firms of the network to be responsible for the assignment (engagement partner) • Dispute settlement procedures through arbitration and conciliation. • Development of training materials for members of the network • Issue of Newsletters for staff and clients.

15. BYELAWS…. • Development of software for different type of assignments. • Delopment and maintenance of databases relevant for different types of assignments. • Library • Appointment of a technical director to whom references can be made.

16. BYELAWS……. • Determining the methodology for drawing resources from each member firm. • Determining compensation to member firms for resources to be drawn from them. • Peer review of the member firms. • There can be many other clauses, which can form the part of the byelaws.

17. Exit • A constituent Member firm/Member of a Network can exit from the network by sending the declaration in Form ‘C’ to the Institute and also to each and every constituent of the network. • The concurrence/acceptance of the same by other firms forming part of the network firm shall not be required.

18. MERGER DEMERGER RULES • Merger agreement in prescribed form to be filed with Institute FORM E • The existing names of the merging firms frozen in the Institute’s records for 3 years • Seniority granted to the new firm from the date of establishment of the firm under whose name the merged entity operates • New name for merged firm possible without losing seniority • Demerger possible within 5 years of merger FORM F

19. STATUS OF MERGED/DEMERGED FIRMS (May, 2010)

20. STATUS OF Management consultancy companies(MCC)

21. DETERRENTS IN CAPACITY BUILDING NETWORK Prohibition on acquiring business in name of Network. No additional economic advantage due to non-recognition of Network by C&AG, RBI, Corporate world etc. Lack of benefit of Network over referral practice. Loss of name & identity of other affiliates as work is assigned to one firm showing collective strength of the Network.

22. DETERRENTS IN CAPACITY BUILDING (contd.) NETWORK Prohibition on advertisement of Network. Bar on accepting internal audit of an entity by other affiliates of the Network if one affiliate is the statutory auditor of the entity. Clash of egos/conflict of interests on issues concerning allocation of cost and sharing of revenue &manpower. Loss of control over quality of work when delivered by other affiliates of the Network.

23. DETERRENTS IN CAPACITY BUILDING (contd.) (B) MERGER-DEMERGER Post merger, there is loss of revenue during cooling period, in case of empanelment of C&AG, RBI etc. Post integration problems like positioning of partners in the merged firm, fear of domination, loss of identity & name, conflict of interest, loss of independence, confidentiality issues etc. Monetary benefits not commensurate with costs.

24. DETERRENTS IN CAPACITY BUILDING (contd.) (B) MERGER-DEMERGER Anticipation of reduction in control over operations of the merged firm. Lack of clarity in issues concerning allocation of cost & sharing of revenue between erstwhile merging firms. Difficulty in opting for Demerger when erstwhile merging firms are constituted of 2 or 3 partners.

25. DETERRENTS IN CAPACITY BUILDING (contd.) (c) CORPORATE FORM OF PRACTICE Difficulty in getting name approval of the MCC due to the condition of mentioning areas of ‘Management Consultancy & other Services’ offered. Prohibition on advertisement by Management Consultancy Company. Lack of clarity regarding Directorship of non-Chartered Accountants & persons from other disciplines.

26. (A) Ethical ISSUES Issues emerging out of the scope of the concept of ‘larger structure’ defined in IFAC Code of Ethics. Examining applicability of Advertisement Guidelines to Network & MCC. Reviewing the bar on accepting internal audit/other professional assignments of an entity if any constituent of Network/MCC is the statutory auditor of that entity.

27. (A) Ethical ISSUES (contd.) Reviewing the use & scope of the term ‘entity’ for ethical compliance norms of Network & MCC. Issues relating to removal of bar on commercial presence of foreign MAFs in India. Expanding the scope of persons who may become Director in MCC so as to include non CAs & persons of other discipline.

28. (B) Corporate issues Allowing Network to function as LLP. Feasibility of Merger of CA firms with firms of other disciplines to engage in Multi-Disciplinary Practice.

29. (C) Issues relating to PDC Promotion of Network in corporate sector, government sector, banking sector etc. Giving weightage to Network for empanelment purposes. Reviewing cooling period norms to facilitate Merger & Demerger.

30. (D) Other related issues Issues emerging out of change in definition of ‘Network’ & ‘Network firm’ in IFAC Code of Ethics. Lack of apparent advantages in Networking. Taxation of Network in case of change in its existing structure. Addressing mindset problems of members regarding various capacity building measures. Addressing the procedural difficulties in Networking, Merger-Demerger & Corporate Form of Practice.

31. MDPS (Multi-disciplinary Partnership) • The Chartered Accountants Act, 1949 [as amended by the Chartered Accountants (Amendment) Act, 2006] provided for, for the first time, a multi-disciplinary partnership.  The relevant enabling provision (i.e., Item 4 of Part I of the First Schedule to the Chartered Accountants Act, 1949)

32.   “A chartered accountant in practice shall be deemed to be guilty of professional misconduct, if he − x x x x x (4)       enters into partnership, in or outside India, with any person other than a chartered accountant in practice or such other person who is a member of any other professional body having such qualifications as may be prescribed, including a resident who but for his residence abroad would be entitled to be registered as a member under clause (v) of sub-section (1) of section 4 or whose qualifications are recognised by the Central Government or the Council for the purpose of permitting such partnerships.”   The said enabling provision came into force w.e.f. 17th November, 2006. BY CA ATUL BHEDA Mumbai For Malad Goregaon CPE Study Circle

33. The consequential enabling provision required to be prescribed/made in the Chartered Accountants Regulations came into force w.e.f. 25th September, 2008.  The relevant persons can be : • (a)  Company Secretary  • (b)  Cost Accountant • (c) Advocate • (d)  Engineer • (e)  Architect • (f)   Actuary • (g) MBA

34. Professional bodies or institutions outside India whose qualifications relating to accountancy are recognised by the Council under sub-section (2) of section 29 of the Act.”

35. Issues • CA Act • 2. (1) X X X • X X X • (2) A member of the Institute shall be deemed “to be in practice”, when individually or in partnership with chartered accountants in practice, he, in consideration of remuneration received or to be received—

36. Issues… • Qualification and disqualification of auditors. (Companies Act) • 226.(1) A person shall not be qualified for appointment as auditor of a company unless he is a chartered accountant within the meaning of the Chartered Accountants Act, 1949 (38 of 1949): • Provided that a firm whereof all the partners pracitising in India are qualified for appointment as aforesaid may be appointed by its firm name to be auditor of a company, in which case any partner so practicing may act in the name of the firm.

37. Issues… • No definition of firm in CA Act • What should be the proportion of CAs in constitution of MDPs • Which Institute will have control • Disciplinary Actions • Other specialized jobs like CS etc • Signing of reports

38. Lessons in MANAGEMENT - THE LAGAAN Way - BY CA ATUL BHEDA Mumbai For Malad Goregaon CPE Study Circle

39. THINK OF CHALLENGES AS OPPORTUNITIES: Captain Russell’s challenge to Bhuvan to play the cricket match was taken up by Bhuvan as an opportunity to bring happiness into the lives of his village folk. BY CA ATUL BHEDA Mumbai For Malad Goregaon CPE Study Circle

40. BE DETERMINED IN FACE OF OPPOSITION: Right from the start when the entire village opposes Bhuvan’s having taken up the challenge to the time when the rest of his team refuses to play because he wants to take in an untouchable in the team. We face this situation many times in our organisations. Many a time, we give up and accept what we feel is perhaps a lesser decision. It is at times like these that we need to speak up- as long as we know we are fighting for the right issue, and not against an individual. BY CA ATUL BHEDA Mumbai For Malad Goregaon CPE Study Circle

41. GIVE EXAMPLES TO ENHANCE UNDERSTANDING: Bhuvan simplified the challenge of learning cricket by portraying it as something similar to gilli-danda. Analogies have that effect and can be powerful in helping tame the seemingly difficult. As managers and leaders, we too have this task of motivating the team members to take up challenges in the projects. BY CA ATUL BHEDA Mumbai For Malad Goregaon CPE Study Circle

42. MAKE A BEGINNING: Bhuvan did not wait to start. He did not see around. He made bat and a ball, got the kid interested and started. Only when we close the door behind us, we will see the doors in front start opening. BY CA ATUL BHEDA Mumbai For Malad Goregaon CPE Study Circle

43. SMALL VICTORIES ARE IMPORTANT AT THE START Bhuvan hitting the ball for the first time in full public view and inculcating a feeling of participation among them. When starting any project it is important to have small wins at the start to motivate the team. BY CA ATUL BHEDA Mumbai For Malad Goregaon CPE Study Circle

44. BUILDING THE TEAM: Building the team is like recruitment. One needs to select the right people and motivate them. He understands the pressures and the soft points of people, and uses this knowledge to make them part of his team. Each one of his team members is treated as special, as being different. BY CA ATUL BHEDA Mumbai For Malad Goregaon CPE Study Circle

45. ALLOCATING ROLES: Bhuvan also assigns responsibilities to each of his people. Just getting the people in the team is not good enough. They have to be told what the goal is. A team consists of different individuals. The objective is to make them all work together like a fist, like a team. BY CA ATUL BHEDA Mumbai For Malad Goregaon CPE Study Circle

46. SUPPORT THE TEAM MEMBERS: Bhuvan backs his team members to the hilt, even when they make mistakes. It is indeed important in any team that the captain backs the right person, at the right time, for the right job. BY CA ATUL BHEDA Mumbai For Malad Goregaon CPE Study Circle

47. Lead From The Front: Never Give Up… that was Bhuvan’s winning mantra. This attitude of his also enabled him to give his best shot even at the last ball and thus win the match. In sport, in business and in life…..always be alert, because you never know when opportunity may knock on your door. BY CA ATUL BHEDA Mumbai For Malad Goregaon CPE Study Circle

48. DEFINE THE ENEMY: To the British it was just a game but for Bhuvan it was fight against the British oppressors and a win against them would bring 3 years of ‘TAXFREE’ life for his village folk. For Bhuvan the enemy was defined as bad, oppressors and merciless British overlords. This clear definition helped him to fight towards a specific goal. In any case, having a clearly defined enemy works as a rallying point for the team. BY CA ATUL BHEDA Mumbai For Malad Goregaon CPE Study Circle

49. OVERCONFIDENCE DESTROYS: Captain Russel and his team members thought that the match would be a cake walk for them because they were a lot of good experienced. But was here that they committed a mistake, they were overconfident and overlooked the ability of the enemy and this is what made them lose the match. Anyone can take a lesson from here, to neverOVERESTIMATEoneself and UNDERESTIMATEothers. BY CA ATUL BHEDA Mumbai For Malad Goregaon CPE Study Circle

50. TRAIN and PRACTICE: There are no shortcuts for physical and mental fitness. Bhuvan and his team strongly believed it and never compromised on it. There is only one mantra: To be well trained and have good enough practice…. which is HARD WORK! BY CA ATUL BHEDA Mumbai For Malad Goregaon CPE Study Circle