Friday, January 30, 2009

CA Final - Inputs for exams - Paper 6 - MICS

Hi Frenz,

I'm just putting down the points that i followed for the CA - Final exams. The books / points referred in the note below need not necesarily be followed. You can always follow other books/ points.

Paper 6 - MICS

1. Padhuka Publications – Sarvana Prasath Book is sufficient for exams

2. If you have attended the class please go through the class notes first and then read the text book.

3. The Subject is full of technical jargons so you need to read the subject again and again say 2-3 readings to get used to the said language.

4. The questions in exams can be of 2 types

a. General Questions – (Example – What aspects will you check while purchasing a computer)
b. Specific Questions – What is DSS.? What are the different kinds of DSS tools.?

5. So for general questions you can write general answers, however for specific questions your answer should be to the point.

6. The pattern of the question paper is as follows:

a. You have to attend 5 out of 7 questions (20 marks each)
b. Question number 1 is compulsory
c. Never attend the 1st question at the start as they are very tricky.

7. Time will not be a constraint. You can spend at the max half an hour for each question. You can easily attend 100 marks within the time given.

8. If you glance the recent papers you can observe that at least one question is asked from every topic either. The objective being coverage of entire syllabus. So please don’t leave any topic. Read everything.

9. Write the answers in points and sub headings. It will fetch you more marks.

10. Wherever possible quote examples.

11. Please go through the RTP prescribed for your attempt, as sometimes the exam problem is one of the RTP questions.

12. Go through some past exam papers and feel the comfort that the same you can answer in exams well within the time frame.

Further Suggestions / Inputs / Comments are invited.
Thank You.

Monday, January 26, 2009

CA Final - Inputs for exams - Paper 5 - Costing

Hi Frenz,

I'm just putting down the points that i followed for the CA - Final exams. The books / points referred in the note below need not necesarily be followed. You can always follow other books/ points.

PAPER – 5 - Costing

1. Padhuka Publications – Sarvana Prasath Book is sufficient for problems & Theory

2. Operations Research Problems – 20 marks sure

3. Theory from OR & Costing – 30 to 40 marks sure

4. First read chapter 16 to 21 (Operations Research) – [Be thorough in theory and problems]
(Assignment, Transportation, Linear Programming, Learning Curve, Simulation, Network)

5. Next read chapter 9 to 15 (ABC, Target Costing, JIT, TQM, Value Chain, Budgetary Ctrl, Performance Measurement)– majority theory questions will come from these chapters

6. Next read chapters in the following order 1,4,5,6,7,8,2,3 (Basic concepts, Pricing, Service Sector, Relevant Costing, TP, Std Costing, Marginal Costing, Decision Making)

7. Marginal costing & Decision making read and understand the concepts only; don’t spend more time on these 2 topics as no material will be sufficient for an exam problem.

8. ABC & Standard costing are regularly asked in exams.

9. When you go through the above authored material you will find many similar problems in a topic, while doing your first reading cut out the similar problems so that before exams you have the least problems for preparing.

10. If you have attended the class please go through the class notes first and then read the text book.

11. Time will be a constraint. You can spend at the max half an hour for each question. Always try to attend 100 marks but don't lose heart if you are not able to attend 100 marks. Attending anything between 80 to 100 marks is really good.

12. The pattern of the question paper is as follows:

a. You have to attend 5 out of 6 questions
b. Question number 1 is for 24 marks and is compulsory
c. Never attend the 1st question at the start as they are very tricky.
d. Other questions are 19 marks each (19x4=76)

13. Theory questions will be very simple and straight forward so please don’t ignore theory. It will help in scoring and also clearing the exams.

14. Please go through the RTP prescribed for your attempt, as sometimes the exam problem is one of the RTP questions.

15. Go through some past exam papers and feel the comfort that the same you can answer in exams well within the time frame.

16. Practice at least one problem from every topic/model. It’ll ensure that you have the momentum and also you will know which problem takes how much time to solve.

Further Suggestions / Inputs / Comments are invited.
Thank You.

Saturday, January 24, 2009

CA Final - Inputs for exams - Paper 4 - Law

Hi Frenz,

I'm just putting down the points that i followed for the CA - Final exams. The books / points referred in the note below need not necesarily be followed. You can always follow other books/ points.

PAPER – 4 - LAW

1. Munish Bhandari authored book (latest relevant for your attempt) for CA Final is sufficient for exams.(Big book)

2. The pattern of the question paper is as follows:

a. Q.No 1,2,3 are compulsory
b. 4 more to be attended out of 6 questions
c. In all 7 out of 9 Q to be attended
d. You can take at the max 25 mins for each question
e. Time will be sufficient to answer all the questions.

3. Approx 70 marks will be from past questions

4. Never attend Q.No 1, 2, 3 first. Start with any other question because always the compulsory question will be tricky or time consuming.

5. If you have attended the class please go through the class notes first and then read the text book.

6. Please go through the RTP prescribed for your attempt, as sometimes the exam problem is one of the RTP questions.

7. Write the answers in points. It will fetch you more marks.

8. Get the latest supplementary from the Institute relevant to your attempt.

9. Please read the provisions very deeply as the exam questions are very tricky. (For eg Applicability of a Section to only Public Co’s and N.A. to Pvt ltd co’s)

10. Please see how to draft a resolution. Every attempt atleast 1 question is sure on drafting a resolution.

11. Don’t leave any topic, especially focus on Directors, FEMA, Interpretation of statues, SEBI, SCRA etc..

12. Just 2 months before the exams Mr. Jayaraman will discuss the important topics for the relevant attempt. At least 50% of the questions in exams are from his important questions. So check out with people who have attended the latest batch of his classes.

Further Suggestions / Inputs / Comments are invited.
Thank You.

Friday, January 23, 2009

CA Final - Inputs for exams - Paper 3 - Auditing

Hi Frenz,

I'm just putting down the points that i followed for the CA - Final exams. The books / points referred in the note below need not necesarily be followed. You can always follow other books/ points.

PAPER - 3 – AUDITING

1. Padhuka Publications – Sarvana Prasath authored book is sufficient for exams.

2. Padhuka Publications books have the following advantages
. It is in very simple English & QA Format
. The coverage is based on the Institute Material
. It covers the Suggested Answers for at least past 10 years
. It covers RTP at least for past 10 years

3. Never attend Q.No 1.first. Start with any other question because always the compulsory question will be tricky or time consuming.

4. Just 2 months before the exams Mr. Ganapathi will discuss the important topics for the relevant attempt. At least 50% of the questions in exams are from his important questions. So check out with people who have attended the latest batch of his classes.

5. If you have attended the class please go through the class notes first and then read the text book.

6. The pattern of the question paper is as follows:
. Question No. 1 (Prof Ethics) & 2 (Accounting Standard & Guidance Notes) are compulsory
. You have to attend 4 out of rest 5 questions
. Time will not be a constraint. You have half an hour for each question.

7. Please go through the RTP prescribed for your attempt, as sometimes the exam problem is one of the RTP questions.

8. If you glance the recent papers you can observe that at least one question is asked from every topic either (theory / problem). The objective being coverage of entire syllabus. So please don't leave any topic.

9. Write the answers in points. It will fetch you more marks.

10. Get the latest supplementary from the Institute relevant to your attempt.

11. There is a very good analysis in Padhuka book about the important topics and the weightage of marks from exam point of view. The reading preference can be in the same order.



Further Suggestions / Inputs / Comments are invited.
Thank You.

Wednesday, January 21, 2009

CA Final - Inputs for exams - Paper 2 - MAFA


Hi Frenz,

I'm just putting down the points that i followed for the CA - Final exams. The books / points referred in the note below need not necesarily be followed. You can always follow other books/ points.

PAPER - 2 – MAFA

1.    Padhuka Publications – Sarvana Prasath & Sai Mukundan authored book is sufficient for exams.

2.    Padhuka Publications books have the following advantages:

a.    It is in very simple English & QA Format
b.    The coverage is based on the Institute Material
c.    It covers the Suggested Answers for at least past 10 years
d.    It covers RTP at least for past 10 years

3.    Time will be a constraint. You can spend at the max half an hour for each question (attending anything between 80 to 100 marks is really good)

4.    Never attend Q.No 1.first. Start with any other question because always the compulsory question will be tricky or time consuming.

5.    Just 2 months before the exams Mr. Pattabiram will discuss the important topics for the relevant attempt. At least 50% of the questions in exams are from his important questions. So check out with people who have attended the latest batch of his classes.

6.    When you go through the above authored material you will find many similar problems in a topic, while doing your first reading cut out the similar problems so that before exams you have the least problems for preparing.

7.    If you have attended the class please go through the class notes first and then read the text book.

8.    The pattern of the question paper is as follows:

a.    You have to attend 5 out of 6 questions
b.    Every question is for 20 marks (20x5=100)

9.    Theory questions will be very simple and straight forward and please don't ignore theory as they ask at least 20-30 marks theory in exams. It will help in scoring and also clearing the exams.

10.    Please go through the RTP prescribed for your attempt, as sometimes the exam problem is one of the RTP questions.

11.    Keep practising the problems during your preparations. It will give you momentum and will let you know which problem will take how much time in exams

12.    If you glance the recent papers you can observe that at least one question is asked from every topic either (theory / problem). The objective being coverage of entire syllabus. So please don't leave any topic. Read everything

13.    Prepare formulae for every topic. Then do the following

a.    Read the theory first
b.    Then Read the formulae
c.    Then practise problems

14.    Read the formulae 2-3 times so that you get well versed with them and can work out the problems quickly.


Further Suggestions / Inputs / Comments are invited.
Thank You.

Tuesday, January 20, 2009

CA Final - Inputs for exams - Paper 1 - Accounts

Hi Frenz,

I'm just putting down the points that i followed for the CA - Final exams. The books referred in the note below need not necesarily be followed. You can always follow other books.

PAPER - 1 – ACCOUNTS

1. The pattern of the question paper is as follows:

a. You have to attend all the 6 questions (There is no choice)
b. Question number 1 is for 20 marks
c. Other questions are 16 marks each (16x5=80)

2. If you have attended MP.Vijaykumar’s classes than his class notes are sufficient for the following topics - [30-40 marks sure] (If classes not attended than get his material from any book store)

(a) Consolidated Financial Statements (CFS)
(b) Amalgamation
(c) Valuation of Share & Goodwill

3. If you have attended the class please go through the class notes first and then read the text book.

Following topics can be read from Padhuka Publications – Sarvana Prasath:

(d) Theory –10 marks
(e) Accounting Standard- 20 marks
(f) Guidance Notes-10 marks
(g) Miscellaneous topics-20 marks

4. Give special focus on Accounting Standard as the same will be asked in Accounts, Auditing & Law exams (almost 60 marks put together in all subjects)

5. Time will be a constraint. You can spend at the max half an hour for each question. Always try to attend 100 marks but don't lose heart if you are not able to attend 100 marks. Attending anything between 80 to 100 marks is really good.

6. First read d,e,f,g then read a,b,c.

7. Never attend a,b,c first. Start with d,e,f,g then start with a,b,c in exams

8. Just 2 months before the exams Mr. MP Vijay Kumar will discuss the important topics for the relevant attempt. At least 50% of the questions in exams are from his important questions. So check out with people who have attended the latest batch of his classes.

9. When you go through the above authored material you will find many similar problems in a topic, while doing your first reading cut out the similar problems so that before exams you have the least problems for preparing.

10. Theory questions will be very simple and straight forward and please don’t ignore theory and the misc topics. It will help in scoring and also clearing the exams.

11. Please go through the RTP prescribed for your attempt, as sometimes the exam problem is one of the RTP questions.

12. Please read recent amendments like definition of SMC, IFRS etc,, in short be aware of the recent happenings in our profession.

13. Keep practising the problems during your preparations. It will give you momentum and will let you know which problem will take how much time in exams.

Further Suggestions / Inputs / Comments are invited.

Thank You.

Monday, January 19, 2009

CA - Final - Study Plan

Hi, i had prepared a Study plan for CA final. You can prepare a plan on same lines which will help u in keeping track of ur study status/progress.


Click Here to view the plan.

Friday, January 16, 2009

Yippie... I'm a Chartered Now..!!!

Hi Frenz,

Yippie... I'm a Chartered Now..!!!

Thanks for all your prayers and confidence in me...

I congratulate other mates who cleared this time...

And rest don't worry.. you'l do it this may...

Regards
Chandan

Thursday, January 15, 2009

CA - PE (II) and Final (Old) Students need not submit test papers for the purpose of getting eligibility certificate.

Eligibility Certificate for PE-II and Final (Old ) students - (14-01-2009)

BOS/Ancnt/ 227/09
January 14, 2009

In terms of the decision taken by the Council recently, students of Professional Education (II) and Final (Old) course may note that they need not submit test papers for the purpose of getting eligibility certificate.

(CA.R.Devarajan)
Additional Director (SG)

Tuesday, January 13, 2009

Highlights of the Companies Bill, 2008


 
Following are the highlights of the Companies Bill 2008 - Accounts and Audit:
  1. Central government can now direct companies under investigation to maintain their books of accounts for a period exceeding 8 years.
     
  2. The requirement of mens rea for penal provisions has been removed.
     
  3. The definition of 'financial statements' now includes Cash Flow Statement
     
  4. The definition of 'financial year' makes it mandatory for all companies to follow a financial year ending on 31st March. Corporates can follow a different financial year only with the prior approval of the National Company Law Tribunal ('NCLT').
     
  5. A holding company is required to prepare consolidated financial statements for all subsidiaries. This requirement was hitherto applicable only for listed companies under the Listing agreement.
     
  6. A holding company need not append the annual reports of its subsidiaries with its own annual report.
     
  7. National Advisory Committee's scope has been enlarged to cover auditing standards.
     
  8. Financial statements can now be signed by the Chairman of the Board, if so authorised by the Board
     
  9. In case of a One Person Company, a single director can sign the Financial statements.
     
  10. Financial statements should be compulsorily approved at a Board meeting. Approval by Resolution by circulation is not permitted.
     
  11. For signing the Financial statements, if only one director is present in India, relaxation was provided under the old law. It is now proposed to remove the relaxation. This is probably because the directors abroad could use their digital signature for the purpose.
     
  12. Contents of the Directors report now include, inter alia, number of Board meetings, inter-corporate loans / guarantees / investments and related party contracts.
     
  13. Particulars of employees and energy conversation are not required to be given.
     
  14. Notice of AGM and other documents are now required to be sent to each of the joint shareholders irrespective of the person whose name appears first
     
  15. Notice of AGM must be mandatorily sent at least 21 days prior to the date of the meeting. AGM cannot be convened at a shorter duration even if it receives unanimous approval of members present and voting at the meeting.
     
  16. The existing section 224 requires a company to appoint at each AGM, an auditor or auditors. The new section 123(1) requires every company to appoint an individual or a firm as an auditor. Since the word "auditors is not present in the new provision, it could be literally interpreted that a company cannot appoint Joint auditors as the legislature has deliberately dropped the word "auditors". On the other hand, could be argued that such an interpretation is absurd and not intended by the legislature. The General Clauses Act states that singular includes plural and hence the word "auditor" under the new provision should be interpreted as 'auditor or auditors'.
     
  17. The onus of informing the ROC the fact of appointment of an auditor has been shifted from the auditor to the company. Company should now inform the above fact within 15 days from the date of the AGM. This information is required to be filed for every appointment or reappointment of the auditor.
     
  18. Time limit has been set for the CAG to appoint the auditors of a Government company.
     
  19. Section 224A regarding appointment of auditors by special resolution has been scrapped
     
  20. Casual vacancy in the office of an auditor arising due to resignation can be filled by the Board subject to approval by the general meeting within 3 months.
     
  21. If the AGM fails to appoint the auditor, the retiring auditor could continue to act as an auditor. The power of the Central Government to appoint an auditor in such as case has been withdrawn.
     
  22. Removal of an auditor or appointment of an auditor in place of one retiring now mandatorily requires a special resolution.
     
  23. NCLT empowered to remove an auditor in case of fraud or collusion.
     
  24. A CA firm registered as a Limited Liability Partnership ('LLP') acquires the status of a body corporate. Such a firm, it appears, would be disqualified from being appointed as an auditor of a company in the absence of an enabling provision.
     
  25. No bar on auditor's relatives having business relationship with the company.
     
  26. Notwithstanding the mode of appointment, auditor's remuneration shall be fixed by the company in the general meeting.
     
  27. Auditor to have the right of access of books of subsidiary company for the purposes of consolidation.
     
  28. Auditing standards have been made mandatory.
     
  29. Auditors report shall inter alia include observations and comments on the adverse functioning of the company and on accounts maintenance and connected matters
     
  30. The new law requires that only the statutory auditor can sign or certify the Auditor's report or any other document of the company. From a plain reading of the new provision, it appears that the company can get certification for its any requirement only from the statutory auditors.
     
  31. Section 127 provides a negative list of 8 services that the auditor cannot provide to the company.
     
  32. The auditor is now entitled as well as obligated to attend the general meetings unless exempted by the company.
     
  33. The provisions for imprisonment have now been provided for contravention by the auditor.
     
  34. Section 233A relating to special audit has been deleted.
     
  35. Infrastructure companies are required to maintain cost records
     
  36. Only a Cost Accountant can be appointed as a Cost Auditor. Earlier even a Chartered Accountant could be so appointed.
     
  37. Central Government approval for appointment of a cost auditor is no longer required.
     
  38. The new law does not provide for the power of the Central Government to direct the circulation of the cost audit report to the members.

Monday, January 12, 2009

Whither the auditors?


One of the major ironies is that Satyam was probably one of the first companies to present its accounts as per the IFRS, which embraces the concept of fair value.

India's version of Enron has finally happened. Satyam-Gate had to occur in the IT industry since the largest numbers in terms of investments, revenues and profits over the years have come from this industry.

It is apparent that a financial wrongdoing of this size — inflated cash and bank balances of Rs 5,040 crore, accrued interest of Rs 376 crore, understated liability of Rs 1,230 crore and overstated debtors of Rs 490 crore — would involve more elements of the balance sheet and, hence, it would not be proper to hazard a guess as to numbers.

Something was waiting to give, thanks to the developments over the last fortnight, although one least expected what has been stated.

Auditors

Though it would take some time for the final numbers to come out and discover all the skeletons in the cupboard, one would not be asking for too much by questioning the role of the auditors.

A first reaction could be that the management has acted in so sly a manner that even the auditors fell prey to these tactics.

The auditors were apparently auditing the books of the company for quite some time now and, hence, a misleading document given to the auditors in 2004 would probably hold good in 2008 also.

Post-Enron, we had the Sarbanes Oxley Act (SOX) in the US. Although Clause 49 of the Listing Agreement was amended to fall largely in line with SOX, being a much more emotional nation than the US, one could expect some drastic steps from the Ministry of Company Affairs (MCA) and the Securities and Exchange Board of India (SEBI).

One of the major ironies is that this was probably one of the first companies to present its accounts as per the International Financial Reporting Standards (IFRS) which embraces the concept of fair value, which attempts to ensure that the balance sheet states the position of the company as it is.

The second and more dangerous possibility is that the auditors knew about it and decided to stay mum. Old-timers in the auditing profession scoff at the audit software of today, and insist that a focus on documentation, manual sampling methods and utilising the concept of exception reporting — going deeper into anything the auditor considers a deviation from normality — would be sufficient to dig up anything that needs digging up.

Audit Committee

One of the most important developments post-Enron was to give unbridled powers to the audit committee. One wonders how this could have passed through a committee supposedly comprising 'independent' people. Independent directors would henceforth have to be independent in the true sense of the term.

The Institute

Many would look to the ICAI for further information and action on this. The ICAI, in its function — to give a very rudimentary corollary — is like the road transport department which conducts tests to find out if one has driving capabilities.

Once satisfied, it issues a licence to practise the art of driving. Now if one decides to flout every law of the land and end up with a broken nose, one can hardly fault the ICAI for having issued the licence in the first place.

Recently, the ICAI issued SSA 550 on Related Party Transactions apparently in response to Satyam attempting to take over a totally unrelated related party. Shareholder dissent stalled the deal while some independent directors showed their independence by resigning from the board.

Just like the hero in a recent Bollywood movie, the parties seem to have suffered from short-term memory loss when questioned about which audit firm valued the companies. Apparently the company is now being looked at as an acquisition opportunity which reflects the grim reality that it takes just one costly, ill-timed and needless move to bring down a major company.

A fearless audit

Globally, there is enough literature now for auditors to conduct a fearless audit. However, given the increasing complexities of business and the scheming manifestations of a few, an auditor would need to consider even the remotest possibility of a material misstatement before he signs on the dotted line.

What feminist icon Gloria Steinhem said probably sums up what auditors should do now: "The first problem for all of us now, is not to learn, but to unlearn."

Sunday, January 11, 2009

CA Final and CPT results to be declared on 16th January 09


The results of the Chartered Accountants Final, Final (New Course) Examinations, Common Proficiency Test (Paper Pencil Mode) and Common Proficiency Test (Online) held in November/December, 2008 are likely to be declared on Friday, the 16th January, 2009 around 2 PM and the same as well as the merit list (candidates securing a minimum of 55% and above marks and upto the maximum of 50th Rank in the case of Final Examination and candidates securing a minimum of 60% and above marks and upto the maximum of 10th Rank in the case of Common Proficiency Test) on all India basis will be available on the following website:


Arrangements have also been made for the students of Final, Final (New Course) Examinations and Common Proficiency Test (Paper Pencil Mode) desirous of having results on their e-mail addresses to pre-register their requests at the above website, i.e., http://www.caresults.nic.in from 12th January, 2009. All those registering their requests will be provided their results through e-mail on the e-mail addresses registered as above immediately after the declaration of the result.

The result of students of Online CPT December 2008 will be available on the following website:

The students of Online CPT December 2008 can check their result using their Login ID and Password at the above said website.

Further facilities have been made for students of Final, Final (New Course) Examinations and Common Proficiency Test (Paper Pencil Mode) held in November/December, 2008 desirous of knowing their results with marks on SMS. The service will be available through MTNL, India Times and Reliance.


For getting results through the message students should type:

i) for Final Examination result the following

CAFNL(space)XXXXX (Where XXXXX is the five digit Final examination roll number of the candidate)

e.g. CAFNL 00028

ii) for Final (New Course) Examination result the following

CAFNLNW(space)XXXXX (Where XXXXX is the five digit Final (New Course) examination roll number of the candidate)

iii) for Common Proficiency Test (Paper Pencil Mode) result the following

CACPT(Space)XXXXXX (where XXXXXX is the six digit Common Proficiency Test roll number of the candidate)

e.g. CACPT 000171

and send the message to:

52001 - for DOLPHIN AND TRUMP users only

58888 - for all mobile services - India Times

51234] for Reliance subscribers (Also accessible through R-World and Voice Portal – To call 51234815 from Reliance Mobiles)

Thursday, January 8, 2009

New Course for CA




Attention CA students - Hindustan Times - New Delhi - 07-Jan-09
Dated: 07-01-2009





Appointment of CS - limit revised to 5 crores from 2 Crores

COMPANIES (APPOINTMENT AND QUALIFICATIONS OF SECRETARY) AMENDMENT RULES, 2009 - AMENDMENT IN RULE 3



NOTIFICATION NO. G.S.R. 11 (E), DATED 5-1-2009


 


In exercise of the powers conferred by clauses (a) and (b) of sub-section (1) of section 642 read with clause (45) of section 2 and section 383A of the Companies Act, 1956 (1 of 1956), the Central Government hereby makes the following rules further to amend the Companies (Appointment and Qualifications of Secretary) Rules, 1988, namely :—


1.  (1) These rules may be called the Companies (Appointment and Qualifications of Secretary) Amendment Rules, 2009.


(2) They shall come into force from the 15th day of March, 2009.


2. In the Companies (Appointment and Qualifications)of Secretary) Rules, 1988, in rule 2,


(i) in sub-rule (1) and in the proviso to sub-rule (4), for the words "rupees two crores" the following words shall be substituted, namely:—


"five crore rupees";


(ii) in sub-rule (3), the second and third proviso shall be omitted;


(iii) after sub-rule (3), the following sub-rule shall be inserted, namely:—


"(3A) A company having a paid up share capital of two crore rupees or more but less than five crore rupees may appoint any individual who possesses the qualification of membership of the Institute of Company Secretaries of India constituted under the Company Secretaries Act, 1980 (56 of 1980), as a whole-time secretary to perform the duties of a secretary under the Companies Act, 1956:


Provided that where a company has appointed under sub-rule (3) or this sub-rule, a whole-time company secretary, possessing the qualification of membership of the Institute of Company Secretaries of India, such a company is not required to obtain a certificate from a secretary in whole-time practice under rule 3 of the Companies (Compliance Certificate) Rules, 2001."

Wednesday, January 7, 2009

PwC's fate Hangs in Balance

Enron & Worldcom had changed the world of auditing from 'Big 5' to 'Big 4'. The brazen fraud at Satyam has the potential to shrink it to 'Big 3', at least in India. The falsification of accounts by Satyam for the past several years has put a question mark on the very survival of its auditor, PricewaterhouseCoopers (PwC)

PwC had audited about 139 companies in India in the last fiscal. Of this, 97 are listed and 45 are part of BSE 500 Index. A few of these companies are already reviewing their relationship. For instance, Glenmark Pharma has said its board will decide on January 27 on whether to propose a change in the auditor.

Some other large companies audited by PwC include Maruti Suzuki, United Breweries, United Spirits, GMR Infra, Piramal Healthcare and Marico.

The Institute of Chartered Accountants of India (ICAI), an apex body of chartered accountants, is likely to take a strict stand on the issue. ICAI said any member firm found guilty in the Satyam case would be severely punished and the auditors could even be barred from practising for lifetime. Although there is no rule in India to penalise audit firms such as PwC on accounting fraud, a senior ICAI member said tainted auditors can be pulled up.

In 2007, ICAI had found partners of PwC guilty of professional negligence in underproviding for non-performing assets in the now-defunct Global Trust Bank (GTB). But this was only after RBI had blacklisted the firm when a string of irregularities surfaced at GTB. In July 2006, PwC's Japanese affiliate Chuo Aoyama was handed a two-month ban on auditing by Japan's Financial Services Agency, for allegedly certifying false accounts of consumer products major Kanebo.

Senior partners at PwC went into a huddle on Wednesday and remained incommunicado for most part of the day. Late in the day, the firm sent a terse statement: "We have learnt of the disclosure made by the chairman of Satyam Computer Services (Ramalinga Raju) and are currently examining the contents of the statement. We are not commenting further on this subject due to issues of client confidentiality."

Partners at other Big Four firms were cautious in their assessment, as investigations by authorities were yet to commence. "There would be an investigation by ICAI to find out whether there was an audit failure," said Richard Rekhy, head of KPMG India, an arch rival of PwC. "The ICAI's council has its own disciplinary committee that will see whether adequate due diligence was ensured by the concerned auditor," he added. Traditionally, most companies appoint one of the Big Four firms — that includes KPMG, Ernst & Young and Deloitte — to do the statutory audit, as it implies that the company's accounts are above scrutiny.

"This is a major loss of reputation for the auditing profession," said a senior partner at Deloitte India. "The Satyam issue will now put the entire profession in an unpleasant light."

An executive for the 170-member PwC said the statement was delayed as it had to be approved by the global parent firm in the US also. Satyam is

NYSE-listed and any statement from PwC would be examined carefully by the SEC. "We are perplexed as to how a fraud of this magnitude could take place," said one senior PwC executive. "We usually check corporate transactions on a test basis. But this is not a small amount. Frankly speaking, the sheer size of it has left us clueless," he told ET on condition of anonymity. The firm is likely to undertake an internal investigation on its own, he added.

Statutory auditors are typically appointed by a company to audit the balance sheet and to verify whether the accounts presented are a true and fair view of the financial state of affairs. Their appointment is ratified at the annual general meeting (AGM) and is typically valid for one year. The accounting firm can be re-appointed following an approval at each AGM. According to RSM Astute India chairman Suresh Surana: "It needs to be ascertained whether any documentary evidence was presented to the auditors and whether that was forged. This episode also shows that there is too much focus on the short-term performance of a company."

Another fallout of the Satyam situation is that many firms could likely consider withdrawing the appointment of PwC. But the procedure is complex and has to be approved at an annual general meeting. The management of a company can only remove an internal auditor.

 

 

Tuesday, January 6, 2009

Government notifies conditions for pre-paid meal cards for the purpose of FBT

As per section 115WB(2)(B)(iii), inserted from the assessment year 2009-10, hospitality expenditure for the purpose of levy of FBT, does not include any expenditure on or payment through non-transferable pre-paid electronic meal card usable only at eating joints or outlets and which fulfils other prescribed conditions. CBDT has now notified Rule 40E prescribing such conditions.
 

(i) The card shall be granted by the employer to its employees under a scheme framed by the employer specifying therein the circumstances under which the meal card can be used by the employee.

(ii) The card shall be issued by the issuing bank.

(iii) An employee shall not be issued more than one card.

(iv) The card shall bear the name of the employer along with the name, photograph and signature of the employee to whom the card is issued.

(v) The card shall be used only by the employee to whom the card is issued.

(vi) The card shall be used by the employee only for the purpose of purchasing ready to eat food or non-alcoholic beverage from a member establishment.

(vii) The aggregate amount of ready to eat food or non-alcoholic beverage purchased during a day by an employee shall not exceed one hundred rupees.

(viii) The details of each transaction of purchases made by the employee against the card shall be maintained by the employer and the member establishment in such manner and for such period as is required under the Act for any other similar transaction.

 

Source: Notification No. 1/2009, dated 5.1.2009

Sunday, January 4, 2009

CS-appointment regulations

Considering the shortage of company secretaries, the government is planning to relax rules for corporates on employing a full time company secretary but their apex body ICSI is opposing the move.

At present, companies with a paid-up capital of Rs2-crore are required to hire a full time company secretary. The government is planning to amend the Companies Act and raise the threshold limit on equity capital from Rs2-crore to Rs5-crore for employing a full time secretary.
Once the proposal is approved, companies with less than Rs5-crore paid-up capital need not employ a full time company secretary and instead they can hire one on temporary basis, an official in the know of the matter said.
The proposal is aimed at addressing the problem of shortage of company secretary in the country.
There are 31,705 companies with a paid-up capital of Rs2-crore plus, whereas there are only around 15,000 qualified company secretary, making it difficult for many companies to appoint a whole-time company secretary, the official said.
The government is planning to amend the Companies Act, 1956, which lays down the criterion for employing a whole-time company secretary, in this regard.
According to Section 383 (A) of the Companies Act, 1956, "every company having paid up capital of Rs2-crore shall have whole-time secretaries and where the Board of directors of any such company comprises only two directors, either of them shall be the secretary of the company".
However, there is a huge gap between the availability of company secretary and their demand by companies. As per the officials, there are 19,582 qualified members of the Institute of Company Secretaries of India (ICSI), of which not even 50% are in employment.
The official said, "The companies above Rs5-crore threshold are only 15,000 so it would be prudent to fill the demand-supply mismatch like this." 
The move is going to benefit around 16,000 companies, as they are not required to employ a whole-time company secretary, which would save cost for them.
However, ICSI President opines differently. "We don't want the limit to be enhanced right now. Large companies are properly governed, it is the small and medium size companies which need good governance," ICSI President Keyoor Bakshi said.
"We will write to the government requesting them not to raise the limit right now. With the economic slowdown, it may not be a right time for such a decision," Bakshi said.
He said as far as the shortage of company secretaries is concerned, the institute has seen an increase in the number of applications this year, with enrolment increasing by 50% this year. Over a period of two years, the gap will be filled, Bakshi said.
This year, 35,000 students enrolled for the course of company secretaries as a result of various awareness campaign organised by the institute. Also, the ICSI is planning to increase its office count from 70 to around 150, which will promote the course, Bakshi said.

Thursday, January 1, 2009

Is your ad not getting a good response? Try an audit firm

A big league packaged goods company recently approached a multinational audit firm in Mumbai to scrutinize how its advertising budget is being spent—and possibly misused—by its media buying agencies. At a time when money is tight, this advertiser wanted assurances that its ad rupee is being optimized and the entire ad spending process made more transparent.

"The money spent on advertisements is significant, so the company wants to make sure that they are getting what they paid for. There have been no stringent audits in this sector in the past, so it is a new trend," says the executive director of the audit firm who does not want his company named. The project, the first of its kind for the auditor, comes with a huge fee.

Such audits would help companies reassure themselves that they are getting adequate returns on their ad budgets as economic growth slows, markets falter and consumer spending tightens.

For auditors, it means a new and potentially lucrative source of revenue.

This audit firm will inspect the media agency's bills and validate if the money allocated for production of radio spots, television ads and for outdoor advertising has been spent judiciously, said the same executive, who's buoyed by the prospect of winning clients from among other big advertisers.

"Many more companies will conduct audits on their ad spends to ensure corporate governance in a falling market," he says.
To be sure, local and international firms such as R3, Ernst and Young India Pvt. Ltd, and Spatial Access Media Solutions Pvt. Ltd have audited advertising spends in the past.

For example, a large soft drinks company has been going to a small auditor to monitor its ad spending. The change, says another auditing company official, is that the process is evolving from monitoring documentation to a harder, more investigative role.

Ernst and Young's audit of media spending is currently more process-driven, including advising clients on contract execution three-party deals between broadcaster, client and agency. Farokh Balsara, partner at Ernst and Young, claims to audit over 40% of total ad spending in India and foresees an increase in clients seeking scrutiny because of the economic downturn.

The main areas that Ernst and Young monitors are media delivery performance, agency contracts and compliance. "If a client is spending Rs100 crore (as media spend) yearly, then can he reduce it to Rs70 crore and get the same kind of reach and efficiency? Those are the questions we address," Balsara says.

Geeta Tolia, partner, tax and regulatory services, Grant Thornton India, says advertisers are seeking two kinds of auditors: one that validates media processes and the other includes specialists in rate bench-marking who determine whether clients are getting the best rates.