Don't ever blame the Auditors; Blame the Systems

Do you think you can develop good singers, if you don’t have good listeners! Give a though on it !!

Similarly, you can’t have good Auditors if nobody takes Audit seriously.

The Auditors are not performing, not because there is a problem with their education, training or sincerity, but for the reason that no one is serious in getting audited. The Audit Reports are prepared just for the purpose of Tax Clearance Certificate (TCC), a traditional approach and importance of TCC for no reason. Where, even two Audit Reports are prepared one for Tax Department and another for Bankers and another for their Internal (Actual) record of the business transactions.

The Auditors of today are equipped with latest Techniques, Standards, education, training, skill-sets etc. and if given an environment, time and a reasonable value for their time, I am sure they can do justice with everyone an investors, authorities or to the own professionals. Therefore, don’t ever blame an Auditor; blame the system where the Auditee is only interested in getting a “Clean Certificate”.

The Auditors of today are working in an environment where many of the Auditees want to hide things and avoid transparency. This includes both Private Sector as well as Public Sector entities. This suits them because unethical business practices have become a way of life. In a race to show good numbers and a glowing picture, businesses try to avoid serious Audits and just try to engage into formalities. They pay least possible fee, give little importance to Audit and Auditor, try to manipulate records, hide facts, indulge in various kinds of unethical business practices, keep transactions off the records and make fool of everyone and still everyone is well educated about this too (that may be the Auditor or the Auditee, or the Banker or the Authorities i.e ICAN, NRB, IDR, OCR and others). While some do this out of compulsion, others have fraudulent intentions.

Ultimately, the sufferers are the taxpayers/ the Investors (on Assessment/ Full Audit has to pay lump sum Overhead to tax officer), the Govt. (loss revenue) and Public at large (misrepresenting the financial statement will never signify the true picture of the company). Therefore, we have to fix entire system and instead of passing new laws/bills, we have to improve and implement the existing ones first in priority. Moreover, if you expect services of International Standards and adopt global practices, you can’t just pay a fraction of fee to the Nepalese Firms as compared to their Global Peers like so called big 4's.

Do we really want to clean the system and do we really want good quality Audit done? If that be so focus on the major areas or sectors:

·   How come that Banks are appointing their own employees as Auditors (Internal Auditors) and keeping important transactions off the records, despite repeated complaints of frauds and misreporting. Strictly regulating the Banks and corresponding the submitted financial statements with the Tax Department.

·     Why Banks/INGOs/ and other corporates insist only on Audits from Big-4/ ancient audit firms. Is this for transparency or for some other reason not known to us. There is nothing which only these ‘Consultancy Firms’ offer and we Nepalese can’t. In fact, I have no hesitation in saying that Young Nepalese Consultants are far more knowledgeable, efficient and capable, as compared to many of these ancient audit firms. However, the Govt., has no interest in intervening in these areas, despite their open flouting of Laws.

·     Why bankers and other corporates do not complain when they find that Auditors have not done their job properly. They wake-up to blame auditors only when a fraud has surfaced in public domain and when it comes down to fix responsibility and accountability.

·     Why there is no serious Audit of various Govt. funded Schemes and there is no participation of CAs in Policy formation and implementation of various Taxation and Fund raising ideas of the Governments. Are we not doing just a formality?

·      There are many more such cases where the Auditee itself doesn’t want interference of Auditor.

Therefore, the quality of Audit will improve only if there is seriousness from the side of Auditee and if the Auditor is paid reasonable remuneration for its assignment. Moreover, the need of hour is to pay Nepalese Firms as per Global Standards, otherwise don’t compare them with Multinational Accounting Firms (MAF). In fact, just like Foreign Law Firms are banned to practice in Nepal, the Big-4 and other MAFs should also be completely banned. Our Institute must take strict disciplinary action against deputations of these Big-4 and MAFs in many sectors but majorly the Auditee Awareness program need to be conducted first to develop the quality system.

It is my belief that no CA or CA Firm can do justification with its Audit and Assurance job with independence and with authority, if his/its appointment and fee is left at the mercy of Clients. Time has come to change this old system of appointing Auditors, which is full of flaws, and put some system in place for allotment of Company Audits.

There are also serious issues w.r.t allotment of various other assignments related to Tax Audits, Internal Audits, Certifications etc., where utmost independence is required. If Clients continue to appoint their own Auditors at their own terms and fee, nothing is going to change and we will always be blamed for mis-reporting.

I don’t think these days trending NFRS /NAS would change rules of the game. If the authority can’t regulate the Appointment and Fixation of Auditors’ Fee, it has no business to regulate the QUALITY OF AUDIT.

Do we expect anything from our Council, or I am hoping against hope? Till date there is no official statement from our council on any policy level at OCR, DOI, IRD, NRB and other government sectors for the CA community. It seems they are ready to take hit from all sides and let this Institute sink. What stops them to take a strong stand on these issues??

Why our council members can’t respond strongly in such a scenario?

Hope fully, the newly elected council members would address and respond to our thought and imperfections being noted.

Therefore, unless entire CA community speaks in one voice, nothing really will happen. Let's not divide, make a multiple groups for the same purpose, Let's unite and work together being a Professional Family Members under the same professional home.

#Stay_Connected

#WeCAN

~By CA Loken

Hunting for Valid Answers

 #ICAN Council Election

Dear Professional Friends,

Let me start with a Quote:

"Life is not always perfect. Like a road, it has many bends, ups and downs but that is its beauty." Enjoy the beauty of your own life Naturally.

Thank your everyone who could make this short go through once.

An Election of ICAN Council is going to be held on coming Jesth 25, 2075 (June 08, 2018), for which i have enlisted  few professional queries for the attention of those past councilors and to the would be councilors. 

How does the Council of ICAN Constitutes 

A council is constituted pursuant to Section 7 of the "Nepal Chartered Accountants Act, 2053" for carrying out, or causing to be carried out, the programmers necessary for the attainment of the objectives of the Institute in a well planned manner and for monitoring and managing all the acts and actions of the Institute.

The Council shall consist of the following councilors;

• 10 Persons elected by CA from among themselves
• 4 Persons elected by RA among themselves
• 3 Persons nominated by Government upon Auditor Generals Recommendation having experience on accountancy.

The councilors shall elect the chairperson and the vice chairperson from the first class CA out of the Councilors members.

Professional interaction for Profession

Why do we elect our representatives for Council? What is their role and what they actually do? Have they done their job perfectly all these years? These are some of pertinent questions which come to our mind. However, when we see the present state of affairs of our Institute, we really find ourselves at the cross-roads and find ourselves in a panic.

Burning issues professional are facing which needs special attentions of the Councilors of the Institute:

• Why no study is conducted by ICAN to understand the demand and supply scenario of CAs in Nepal. The uncontrolled intake has led to a situation where many students are left frustrated, as they are stuck in the finals. No serious effort has been made to understand the dilemma of new CAs coming to market and their aspirations. I find many young CAs working at Salaries which a simple graduate draws in the market.
• Why the Institute has not been able to enhance the quality of education? (Where can the students find their updated study materials they are paying for during the registration itself). It appears that the quality has taken a back seat and the drive is only on quantity. This institute is not a money minting machine. It must not compromise on quality and standards at any cost. Instead of accumulating funds and enhancing its cash and cash equivalents, it should concentrate more on quality, ethics, developing un-matched skills, creating power in the hand of professionals, giving more benefits to members and add value to its brand by all means. Here, I would refrain from quoting comments of general public on deteriorating Standards of our profession.
• What and how many Certification by CA has the institute made mandatory before presenting any report or any documents with the government or other else, so far.
• Has the Institute generously regulated the members (Registered Auditors). The double Book Keeping practice, double signing of Audited Reports (For Bank and Tax Separately). Is the institute unknown about it or are the councilors just fighting for their political career and other personal interest (business development) sorts of things. 
• Why the Institute has not increased to the level where it has greater role to play in Annual Budget preparation and other National & State level policy matters ( Where there could have been a major role of CA) where interest of profession is involved.
  
  The Government takes recommendations from Corporate Houses, Business Chambers and Trade Associations or Foreign Experts (Big 4 kinds of Firms), but hardly gives any importance to a premier Institute like ours.
• Why ICAN is traditional as 'just an Accounting and Auditing Standardization Body' when we professionals overly contribute in the overall trade, commerce, taxation, Audit and Assurance, financial services, start-ups, mergers & acquisition, e-commerce, etc.? This clearly shows that the Institute has not made enough efforts for Marketing and Brand Building. No research centers yet all.
• The institute has not launched a Post-qualification courses (if launched no one is well known about it and none has picked-up recognition in the market). Institute should have launched and well-marketed Post-qualification courses to the Corporate and other end users of the Nepalese market. This kind of passive approach will not work in the interest of its members.
• As a leading Institute and having interest in the area of taxation matters, the Institute has never attempted to develop any user friendly software for the benefit of its members for filing Tax Returns and TDS returns in collaboration with the Inland Revenue Department (IRD).
  
  
  
• As a principal accounting body, the Institute should have played major role in standardizing Accounting Software which are in compliance with Company law, Accounting Standards and Tax laws of the country. Instead, all is left to the market forces (The developers them self-standardize the software as per the required statute, where no CAs requirement seems needed). I feel, there is a need for a common platform across the country. Today, we have come to a situation where even accounting software has to be updated on yearly basis. It's a free for all kind of a situation where the Institute has totally surrendered and left the field open for anyone and everyone and at any cost.
• The ICAN should have played effective role at the time of preparation and passing of new Companies Act, 2073, and further what I felt is that the Office of the Company (OCR)
  
  Should have consulted the Institute in every new development and changes (amendments), but they develop the system as per their own ease, wherein the authority of CAs has been significantly diluted.
  
  
  
  
• Creation and Collection of "Building Fund" was a good idea. Has it been able to make any numbers of Regional Center Buildings (So far, as I was been helped to know about the numbers of Regional Centers as on date it's at Biratnagar, Pokhara, Birgunj, Nepalgunj, Dhangadi, Butwal   and Rented). But what purpose it has served so far?
• There have been questions raised by most of member's firstly w.r.t to transparency in allocation of Bank Audits and other Govt. related assignments and next never ending concept of Branch Audit of Banks.
  
  Young practitioners and members do look for such assignments with great hope. However, they feel disappointed when they do not get such assignments on equitable basis. The Institute should function as an exchange for collection and distribution of all Banks and Govt. related assignments based on some standards rather than the Individual Autonomous take of Office of the Auditor General only.

Association of Chartered Accountants of Nepal (ACAN) so far known to be an association of chartered accountants need to take an step ahead for our profession and professional.

Let's not make the Profession political. Let's brand our profession together with a simple tag "Your Brand is My Brand". 

There are many more questions and issues which our members are coping with. Therefore, it will not be wise for our Council members to do any routine administrative functions to be their achievements. We can't ignore the situation on the ground and keep living in a fool's paradise for long.

However, I am not at all a pessimist and look forward for change to happen sooner than later. Let's not get influenced by a few elements, let's unite together for the profession, if not the profession will suffer and if profession suffers, we will all fall down under the fragments of a half-built bridge.  

We have seen personalities taller than Institutions and here we are just trying to keep our Institute standing with pride, dignity and authority. Believe me it is not a very big deal. The only need of the our profession is strict determination and right motive for reinforcing the Brand "CA".

'I Hope Things Can Change And Things Can Change Fast'

Wish you all the best in your professional endeavor.

"Let's Participate and Progress Together"

"WeCAN"

#Stay_Happy, #Stay_Safe, #Stay_Connected 

~ By CA Loken