Revision Of Disciplinary Action Procedure Against Icai Member Accounting Essay

The two chief pieces of statute law regulating the securities market in INDIA: Clause 41 of Stock Exchange Listing Agreements requires all listed companies to print one-year audited fiscal statements.

Listed companies in India are required to follow with, Securities and Exchange Board of India ( SEBI ) Act of 1992, demands as defined even in the Securities Contracts ( Regulation Act 1956. The Companies Act 1956 specifies the audit of one-year histories of a company is mandatory and indispensable portion of an integrated concern.Section 226 of the Act provides for the making and disqualification of hearers that lone persons possessing the needed cognition and accomplishment can be appointed as hearers and they should be independent in transporting out their work to give an indifferent sentiment based on nonsubjective appraisal of facts. Thus the hearer should hold no involvement fiscal and otherwise whether straight and indirectly, in the company and/or in its direction.

Section 224 ( 1 ) of the Act seeks to guarantee that the assignment of the hearers is non in the custodies of managers instead vested in general organic structure of stockholders.The Chartered Accountant Act ( 1949 ) governs the accounting profession in India: The Chartered Accountant Act, 1949 ( Act No. XXXVIII of 1949 ) states the followers: -Formation of Quality Review Board: Section 28A, the board would be an independent organic structure mandated to repair the criterions for audit services, guide members to better the quality of services, and reexamine the quality of services provided by the hearers.

Revision of disciplinary action process against ICAI member.

Addition in the proportion of Government representation on the ICAI council.

Directors and direction of company are required to guarantee conformity with commissariats of the Companies Act ( 1956 ) . Besides, a company`s hearer has an duty to convey to the attending of the stockholders any disobedience with commissariats of the Act with regard to the fiscal coverage and associated legal facet.Therefore, ( a ) proficient competency,( B ) professional independency play a important function in dispatching responsibilities in pattern to attest what he does non believe to be true and take sensible attention and accomplishment before he believes that what he attest to be true.

Structural and Regulative Comparison: Periodic coverage demands vary significantly. ASX has a comprehensive periodic coverage model in add-on to uninterrupted revelation. All companies must supply full twelvemonth histories in add-on to half annual studies.


Section 227B of the Corporate Law Economic Reform Program ( Audit Reform and Corporate Disclosure ) Act 2004 establishes the Auditing and Assurance Standards Board ( AUASB ) as the independent statutory organic structure, which, under subdivision 227B of the Australian Securities and Investment Commission Act 2001, may explicate counsel on scrutinizing and confidence affairs. The revised and redrafted Australian Auditing Standards ( ASAs ) will utilize the tantamount ISAs as the underlying criterion and are expected to be operative for audit of fiscal studies with describing periods get downing on or after 1 January 2010.


The Auditing and Assurance Standards Board ( AASB ) of the ICAI recognizes the development of Auditing and Assurance Standards ( AAS ) on the footing of continual acceptance of ISAs. The AASB compares all AASs with current version of ISAs and examines any important differences. ( http: // )“ A landmark understanding between CPA Australia and ICAI highlights the progressively planetary nature of the accounting profession ” said President, CPA Australia, Alex Malley. ( MOU with CPA Australia acknowledging each others making ) ( www.caclubindia.

com )ASX Corporate Governance Council ‘s indispensable corporate administration rules specify that a company should:Promote ethical and responsible determination devisingSafeguarding unity in fiscal coverageMaking seasonably and balanced revelation and ; moreoverThe regulative mechanism turn toing corporate administration in Australia has emphasized ‘accountability ‘ and ‘transparency ‘ through required revelations particularly to stockholders. Commissariats of Corporations Act 2001 and ordinances address audit quality as that how good an audit detects and studies stuff misstatements in fiscal statements.Mukherjee, ( 2007 p,24 ) states that Indian GAAP ( Generally Accepted Accounting Principles ) , will fall in line with International Financial Reporting System ( IFRS ) by 2009 as an Ernst & A ; Young India Survey showed that 95 % of CFOs of the companies wanted India to follow planetary accounting criterions. The study farther reflects that 64 % favoured IFRS and 31 % supported US GAAP.AUASB releases charter, in September 2009: The AUASB has released three exposure bill of exchanges ( ED ) of Australian Auditing Standards in Clarity format. They are:ED 18/09: Proposed Auditing Standard ASA 101 Preamble to Australian Auditing Standards.

ED 19/09: Proposed Auditing Standard ASA 520 Analytical Procedures.ED 20/09: Proposed Auditing Standard on Review Engagements ASRD 2410 Review of a fiscal study performed by the independent hearer of the entity.Clarity Standards: Deductions For Australian Auditing: On 30 October 2009 the AUASB issued the revised and redrafted suite of ASAs, which apply to audits of fiscal studies for periods get downing on or after 1 January 2010.

Corporation Act 2001- Sec 307A

Audited account to be conducted in conformity with auditing criterions:If an single hearer or an audit company, behaviorsAn audit or reappraisal of the fiscal study for a fiscal twelvemonth ; orAn audit of the fiscal study for a half twelvemonth ;the audit or reappraisal in conformity with auditing criterions and the lead hearer ( who is chiefly responsible to the audit house or to the single hearer as the instance may be, sec 324AF Corporations Act 2001 ) must guarantee that the audit or reappraisal is conducted with in conformity with the auditing criterions.Corporation Act 2001 sec 336 describes scrutinizing criterions and the power AUASBs to do auditing criterions.

International Response to Auditing Needs: The constitution of the International Auditing and Assurance Standards Board ( IAASB ) , of International Federation of Accountants ( IFAC ) , to better the quality and uniformity of pattern throughout the universe, by publishing International Standards on Auditing ( ISAs ) and counsel on its application is a certain response to the above demand.India ‘s Response to Auditing Needs: The constitution of Auditing Practices Committee, or Auditing and Assurance Standards Board ( as it is now known in September, 1982 ) is one of the stairss by ICAI to guarantee that its members discharge their responsibilities with due professional attention, competency and earnestness. The chief aim is being issue of scrutinizing criterions under the authorization of the council.Rationale of Auditing Standards: They represent a codification of the best patterns of the profession, which already exist to assist in optimal discharge of professional responsibilities. These criterions promote uniformity and comparison in pattern.International Harmonization of scrutinizing Standards: The ICAI is a member of the International Federation of Accountants. Therefore as a affair of policy, the auditing criterions issued by the ICAI are in harmoniousness with the International Standards on Auditing ( ISAs ) .

Presently, IAASB of the IFAC has issued 39 engagement criterions, consisting 1 criterion on quality control ( ISQC ) , 32 ISAs, 2 International criterions on reappraisal battle ( ISREs ) , 2 International criterions on confidence battle ( ISAEs ) and 2 International Standards on related services ( ISRSs ) . The ICAI has issued 35 Auditing Standards matching to the battle criterions issued by the IAASB of the ISAB.ICAI uses IFRS and ISA extensively in developing the national criterions. The ICAI duly considers the IFRS and ISA in standard scene procedure and may go from these criterions if justified, maintaining in head the local environment and patterns.

The Ethical Scenario: Conformity with Auditing Standards

While dispatching their attest maps, it is the responsibility of the member of the Institute to guarantee that the auditing criterions are followed in the audit of fiscal information covered by the audit studies.

If for any ground the member is unable to execute an audit in conformity with the by and large accepted auditing criterions, his study should pull attending to any material goings there signifier, neglecting which he would be held guilty of professional misconduct under clause 9 of part1 of the 2nd agenda to the Charted Accountants Act 1949aˆ¦aˆ¦.Table

Comparative Position of Standards, issued by the International Auditing Assurance Standards Board of the International Federation of Accountants vis-a-vis. Auditing and Assurance Standards ( AASs ) issued by ICAI.


Title of ISA


AAS/ Guidance Note

200Objective and General Principles Regulating an Audited account of Financial Statements0102Basic Principles Regulating Audited accountObjective and Scope of the Audit of Financial Statements.

240The Auditor ‘s duty to see fraud and mistake in an audit of fiscal statements.04The Auditor ‘s duty to see fraud and mistake in an audit of fiscal statements.300Planing an audit of Financial Statements08Audited account Planning310Knowledge of Business ( withdrawn pursuant to ISA 315 & A ; 330 )20Knowledge of the Business.330The hearer ‘s processs in response to assessed hazards.The Exposure Draft is under consideration, of the proposed AAS401Hazard appraisal ( withdrawn )06Risk appraisal & A ; internal control.800Report on Special intent auditGuidance Note ( undertaking undertakenNew AAS No. ( Old no. ) Title of the Statement Effective DateSA 200 ( AAS 01 ) Aims and Scope of the Audit of Financial Statements 01/04/1985SA 200A ( AAS 02 ) Aims and Scope of the Audit of Financial Statements 01/04/1985SA 230 ( AAS 03 ) Documentation 01/07/1985SA 240 ( AAS 04 ) The Auditor ‘s Duty to See Fraud and Error in an Audited account of Financial Statements 01/04/2003Australian Auditing Standards ( ASAs ) : ASA 200 ( Objective and General Principles Regulating an Audited account of a fiscal study ) , ASA 240 ( The hearer ‘s duty to see fraud in an audit of fiscal study and ASA 330 ( The hearer ‘s processs in response to assessed hazard ) are in conformance with the ISAs.

Reconciliation of the above Indian Standards:

ISA non relevant to the Indian Legal Environment: ISA 720 ( Other Information in Documents Containing Audited Financial Statements ) & A ; ISA 545 ( Auditing Fair Value Measurements and Disclosures )ISAs matching to which the bill of exchange of AASs are under consideration of the Council: ISQC 1 ( Quality Control for houses that perform Audited accounts and Reviews of Historical Financial Information, and other Assurance and related services battles ) .ISA yet to be considered by the AASB of ICAI: ISA 701 ( Modifications to the Independent Auditor ‘s Report ) , ISA 800 ( The Auditor ‘s Report on Special Purpose Audit Engagements & A ; ISA 2410, ISA 3000.Indian Auditing and Assurance Standards are loosely in line with ISA: The text of AAS by and large replicates the text of the tantamount ISA with alterations that adapt to local fortunes when considered necessary.

For e.g. Indian AAS, Responsibilities of Joint Auditors, does non hold an tantamount ISA due to the prevalence of joint audits in state-owned endeavors, Bankss and insurance companies.The Gap between AAS and ISA is important in its stuff affect on confidence battles, except in few countries: The criterion on “ audit sampling and other selective testing processs, ” both as written and as practiced in the state, significantly differs from ISA.APES ; Accounting Professional and Ethical Standards: The criterions issued by the APES Board include the codification of moralss for professional comptrollers.APES 110 and amendments to this Code conform to the Code of Ethics for Professional Accountants Section 290 ( Revised ) issued by International Ethics Standard Board for Accountants ( IESBA ) in July 2006.

The hearer independency demands in APES 110 are aligned with the Australian Corporations Act.Difference between APES 110 and the IFAC Code:Section 290 in APES 110 by and large refers to Audit Clients whereas the IFAC codification refers to Financial Statements Audit Clients.Section320.2 of APES 110 to boot provinces that a member in concern should guarantee conformity with professional criterions.

Code of professional behavior regulation comparing: ( Cross state comparing )

RuleIndiaAustraliaIndependence/ObjectivityMembers are prohibited from showing an sentiment on fiscal statements if they have a significant involvement, unless it is disclosed in the audit study.

Members must be free of any involvement that which is incompatible with the unity.Integrity/Discreditable ActsMembers should execute their services with pride in penchant to personal additions.Members must carry on in a consistent mode with the good repute of the profession.Conformity with professional criterionsMembers must carry on audits in conformity with by and large accepted auditing processs.Members to transport out their work in conformity with relevant proficient and professional criterions.CCI ( Confidential Client Information )Members are guilty of professional misconduct if they divulge CCI.Members must non unwrap CCI to 3rd parties without specific authorization or unless there is a legal responsibility to unwrap.Contingent FeesMembers are prohibited from bear downing fees based on per centum of net incomes.

Members are prohibited from executing services for a fee contingent on the consequences or findings.

Differential Comparison:

Therefore, independency in India is impaired:If any relation of the member is deemed to hold a significant involvement in the concernAs a consequence of loans to or from clients.And ; Australian codification provinces members may keep portions in a private company or be a member of a house transporting on a commercial project if these are simply investings ; provided the member does n’t well take part in the active direction of the house. And, furthermore Australian codification ‘only ‘ provinces to transport out the work in conformity with the proficient and professional criterions relevant to the work.

Comparison of Similarities:

Even in the face of disparate economic, political, societal, legal and cultural environments between these two states, there is some grade of convergence in the ways different professional accounting organisations define their regulations of behavior.

A certain grade of unanimity is detected in the comparing of codifications, but certain ethical regulations are of import and should be of concern irrespective of national application. Such unanimity tends to follow some common ethical parametric quantities and rules. Rules related to independency, unity, struggles of involvement are few illustrations of cosmopolitan applications irrespective of nationalities.

Revising the ICAI Code of Ethics, to convey in line with the IFAC codification of Professional Ethical motives: Some limitations prescribed under the current ICAI codification of moralss need immediate alteration in order to increase the fight of Indian Audited account Firms. The Naresh Chandra Committee has made several recommendations in this respect that should be legislated. Several regulations defined by ICAI appear more rigorous than those defined by IFAC.

Cultural Influences: In the codifications of professional behavior two facets of audit independency are recognized by and largeIndependence in fact which set up the importance of fiscal, concern or household relationships that may impact auditor-client dealingss.Independence in visual aspect or perceptual experience is more a affair of mental attitude and potentially influenced by cultural background.The above survey recognizes that Australia placeholders for the Anglo-American bunch ( UK, US, Canada ) and India placeholder for the Asiatic Indian bunchs. But, both are members of the “ British Commonwealth ” theoretical account of accounting, inherited from UK, corporate statute law and accounting patterns where “ true and just ” position and exercising of professional judgement are as of import.

The construct of an person as a separate individual to make up one’s mind and distinguish the ethical and unethical is by and large absent among bulk driven Indians, whereas Australians ( Anglo American Cluster ) topographic point more importance to individuality and independency. In the context of auditor-client relationship the client is regarded as more powerful party because of the option of exchanging hearers. Because of cultural apparatus of keeping harmonious interpersonal dealingss Indian Accountants are more likely to submit to clients. The 2nd ground as compared to Australia people in India are influenced in their ain opinion and appraisal of others opinion. The responses to the questionnaire to “ big-six ” houses in India and Australia in which Indian faculty members regarded importance of ; ( I ) holding good working relationships with higher-ups, ( two ) responsibility, earnestness and dedication at work and ( three ) turning away of struggle and care of hierarchal equilibrium and harmoniousness. And, Australian faculty members professed the importance of development of an individualistic “ competent ego ” and endeavoring for power equalization.

Thus the Australian comptrollers are less likely to submit to clients than the Indian comptrollers. Therefore, four points distinguishing Australian Accountants from Indians associating to the rating of hearer ‘s behavior are:Fair/unfair, 2. Just/unjust, 3. Acceptable/unacceptable to household, 4. Culturally acceptable/unacceptable. The first three points differentiate on the footing of rating of determination in footings of built-in equity and justness. The last being a constituent of comparative ethical opinion influenced by cultural backgrounds.Indian Audited account: Elusive Independence: Satyam scam an event of “ Horrifying Magnitude ” .

On January 12, 2009 elected representatives of comptrollers and hearers debated the cozenage and PriceWaterhouseCoopers ‘s function in it. The demand is for greater independency from the companies they audit. The inquiry is ‘How can the statutory hearers be independent if they are paid by the company they are supposed to scrutinize? The fees can act upon the study card, it is the concluding unit of ammunition of treatments within the direction where corners are cut and the histories are window dressed.

“ Independent ” managers on the Satyam board were non truly independent and that hearers frequently acted in collusion with corrupt company directors. Furthermore, the histories had been audited by internationally reputed house PWCs.