Challenging roles of a ca

INDEX1. Introduction Slide 4

2. Challenges faced Slide5

3. CA as an Intern Slide 6

4. CA as Fresher Slide 7

5. As a Fresh Lancer Slide 8

6. Experienced CA Slide 9

7. What is Ethics Slide 10

8. Professional Ethical Dilemma for Accountants Slide 11

9. Satyam Computer Services Slide 12

10. Challenges faced during Bank Audit Slide 13

11. Scope of Statutory Report Slide 14

12. Significant Risk Impacting Banks Slide 15,16,17

13. Long Form Audit Report Slide 18

14. Pecularities of Bank Audit Slide 19

15. E-Filing Slide 20,21

16. Comman Errors Slide 22

17. Insurance sector Slide 23,24,25

18. CA Technologies Slide 26,27

19. Disadvantages Of CAAT Slide 28

20. Conclusion Slide 29

21. Bibliography Slide 30

22. Thank You Slide 31

Professional accountants have an important role in society.

The attitude and behavior of professional accountants in providing following services have an impact on the economic well-being of their community and country.

Investors,creditors,employers as well as the government and the public at large rely on professional accountants.

INTRODUCTION

INVESTORS CREDITORS

EMPLOYERS GOVERNMENT

PROFESSIONAL ACCOUNTANTS

Challenges faced

intern fresher

Bank audit E-Filing

Technology

Insurance sector

Difficult Transfer Procedure Low Stipend Lack Of Quality Training Leave During Exams Timings of ArticleShip Training Discrimination Amongst Articles

CA AS AN INTERN

As an Employee CAs today face top challenge from MBAs

who are good at communication skills, know finance and economy better.

MBAs have an edge over CAs in many fields as the Indian economy is much closer to the world economy now.

There is a need for CAs to take leadership by virtue of their quality and have knowledge over other matters besides accounting.

CA AS FRESHER

As a freelancer Starting a practice is not possible for new graduates.

This is not an era when a CA can practice on his own. Clients give work to specialized CAs who have

earned a good reputation and are experienced. However, this is not possible for a fresh CA.

A fresher cannot hire a team for direct taxes, indirect taxes, Sebi, NRIs etc as it requires a huge investment.

The rising demand for CAs in the corporate sector will result in competition between CAs in the job market.

Any CA who wants to remain successful has to constantly upgrade his skills.

Following are the fields where experienced CA face challenges :-

Ethics Bank Audit E-Filing Insurance sector Technology

EXPERIENCED CA

Ethics is concerned with how an attitude, action Or decision is determined as

‘right or wrong or good or evil’

ICAI Code of Ethics – key principles Integrity Objectivity Professional Competence and Due Care Professional Behaviour Confidentiality

What is

ethics

POTENTIAL ETHICAL DILEMMAS FOR ACCOUNTANTS

Monthly financial targets not likely to be met and/or possible breach of bank covenants.

Possible manipulation of figures in financial accounts

Pressure from client/bank if an audit report needs to be signed today and there is insufficient information to know whether accounts show a true and fair view

Whether to make people aware of conflicts of interest in business dealings.

• Case study “Double your money”. “Silence is golden”.

SATYAM COMPUTER SERVICES

Started as an attempt to disguise a poor quarterly performance and then got out of hand.

Manipulation of accounts for several years.

Impact of scandal on India’s reputation.“ It was like riding a tiger, not knowing

when to get off without being eaten. ” Mr B Ramalinga Raju, Chairman and Chief Executive”

CHALLENGES FACED DURING BANK AUDIT

Indian Banks are governed by Banking Regulation Act, 1949.

Banks are highly regulated entities , regulated by the Reserve Bank of India.

Key characteristics of Indian Banks are: Principal business of acceptance/ placement of

deposits, commercial lending activity and treasury/ investment activity; 

Highly regulated entities (RBI) Conduct of business and operations is either

centralised or decentralised in branches; Significant dependence on technology due to

very high volumes and high degree of automation of operations.

SCOPE OF STATUTORY AUDIT

Audit Opinion on the financial statements of the Bank- Balance Sheet, Profit and Loss Account, Cash Flow Statement and disclosures in Notes to Accounts;

Consolidated Audit Opinion on the consolidated financial statements of the Bank, its subsidiaries, joints ventures and associates;

Long Form Audit Report; Various Statutory Certificates (as mentioned in the

RBI appointment letter)

 Risk Category

 Key Areas of Focus for a CA

 Credit Risk

 Risk that a borrower will be unable tomeet its obligations

  • Assessment of recoverability of Advances, Investments, Derivatives and Other Assets

 Liquidity Risk

 Risk that the bank’s obligations to repay liabilities or fund new loans exceeds the banks ability to raise funds from either the liquidation of assets or the acceptance of new deposits

 • Review of maturity pattern of assets and

liabilities

 Market Risk

 Financial impact on a bank resulting from movements in exchange rates and interest rates

 • Review of stress testing performed on the

portfolio

 Regulatory Risk

 Non Compliance / violation of Regulations resulting in penalties and fines

 • Assessment of compliance with Banking Regulation

Act, 1949, guidelines and notifications issued by RBI for conduct of operations, accounting of transactions and disclosures

SIGNIFICANT RISKS

IMPACTING BANKS

 

Area of Focus 

Key challenges/ Issues in bank audit that a CA faces

    

Valuation ofAdvances

 

• Review of assumptions underlying specific provisions computed by management.

 

• Assessment of external factors impacting recoverability of advances.

Valuation ofDerivatives

• Review of models and assumptions used for valuation of derivatives .

• For example- model framework/policy.

Reconciliation ofNostro balances

• Review of significant un-reconciled debit and credit entries.

• Existence of balances (obtain external bank confirmations).

 

Impact of Direct and Indirect tax laws on business/ transactions    

Information Technology – Security

 

Direct Tax • Extent of deduction which can be claimed for Head Office Expenses (applicable to foreign bank branches) • Transfer Pricing implications on cross border transactions

 Indirect Tax • VAT on assets repossessed and bullion transactions   

• Data security and confidentiality  • IT systems/ infrastructure to be housed onshore 

LONG FORM AUDIT REPORT(LFAR)

LFAR to include matters specified in RBI Circular on Long Form Audit Report (e.g. Liquidity and funds management, Advances, etc)

LFAR to be submitted by 30th June following the year end. The above circular is the minimum requirement; auditors are

encouraged to report any other matter . Examples include: −Outsourcing of activities (e.g. processes which can be

outsourced) −Branch wise LFAR report for Private Sector Banks having

centralized operating systems may be considered .

Key issues include: Commentary on Large Advances

PECULIARITIES OF BANK AUDIT

Peculiar nature of banks and need for special audit considerations owing to-

Risks associated with the transactions Extensive dependence on IT to process transactions as

Operates through wide network of branches. Wide range of services offered such as ATM, net/phone banking, etc

Scale of operations Large number of branches –inland and overseas Large volume and variety of transaction in both numbers and value

Statutory and regulatory requirements. Increasing number of new services and banking options. Large number of branches requiring decentralization of authority

and delegation of power.

E-FILING

The process of electronically filing of income tax return through internet is called E-Filing. But there are certain problems that a chartered accountant faces.

Difficulties faced Email ID is compulsory. But, Difficulty in creating login ID as

the data may get mismatched in PAN records. Digital Signature compulsory in specified cases – which include extra Cost – Difficulty in Registering of Digital Signature – Possible Misuse of Digital Signature. Details of Profit and Loss A/c. and Balance Sheet – Many Expenses do not find mention in the format – Most such items will be clubbed as Other Expenses – Classify as near to the relevant head as possible – Ensure that all items are put somewhere or other.

Heavy Reliance on Software – any Mistake in development of software can create problems

– Example : Set off of unabsorbed losses

– Effect of Refund Received - which is to be repaid due to increase in tax liability in 148 Return.

One needs to be careful – while filing in correct and accurate

details – specially email address, mobile nos. etc.

–Exact amount paid in each challan should be mentioned –

Rounding off leads to mismatches.

COMMON ERRORS Entering Exempt Allowances in Salary income. Incomplete entries or lack of proper cross

linking of various schedules. Mistake in mentioning date of payment of tax

– the date of payment of Tax deducted by deduct or shouldn't be mentioned.

Non filing of details of Block of Assets in Sch. DEP.

Entering negative value in Such DEP. Negative value indicates that the Block has

ceased to exist and so depreciation will be computed at NIL.

INSURANCE

SECTORThe present scenario of the Indian insurance market has brought in new challenges as well as opportunities.

Chartered Accountants are known fortheir keen analytical ability, excellenttechnical skills and meticulous working style. Their vast experiencein professional interaction with people bears testimony to theireffective communication and interpersonal skills. Chartered Accountants, as professionals, can emerge as insurance specialists. Chartered Accountants can face challenges in the field of risk management, insurance management, insurance marketing, underwriting management, claims management, loss adjustment, re-insurance, product development and many allied areas such as:

Arbitration

• Arbitration is a procedure of settlement of dispute between two parties by an authority called arbitrator. • A CA would have to utilize his technical and analytical skills to assist the parties to a dispute either as a counsel or he may decide on the dispute of the parties as an Arbitrator.

New Product Creation

• CAs need to render appropriate customer understanding to design appropriate products, determine price correctly and increase profitability. • They challenge is to advise on premiums, rebates and the like for products unique to specific industries/companies and suggest risk -mitigating measures.

Policy Owner Services• It has been accepted fact that notable new insurance business are generated through the existing policy holders and the principles of Customer Relationship Management which professionals like CAs have to understand and provide their skilled knowledge accordingly.

Underwriting• Underwriting, a core insurance activity, involves classification of risks on

the basis of risk characteristics so that insured parties pay premiums proportionate to the risk.

• CAs would have to analyze the information to determine the right prospect and also have to see and secure profitable business to the insurer.

Claims Administration• This is a structured method of managing claims right from the initial report to the final payment or appeal - typically following an existing system. •Claims processing is highly data intensive and time sensitive. •For this CAs would have to provide their services in effective management and understand the system and interact with the concerned parties.

TECHNOLOGIESThe challenge faced in technology used by CA:- Living in an “always-connected” world is one

of the major challenges that confronts CA Young people today-the Facebook generation-

interacts in a virtual world They expect the same transparency and

opportunity to share in their professional lives which they are bound to continue lifelong.

They have no inclination or patience for face to face interaction and in getting their task done.

"Change is a constant factor and for the profession of accountancy not to become obsolete with the technological advances it is important to constantly renovate and reinvent the industry to meet the needs of the future."

DISADVANTAGES OF CAAT

An accounting system, whether it be manual or computer-based, is subject to mismanagement, error, fraud, and general abuse. Hence to combat these potential problems there is a need for controls and auditing in a computerized setup. But, every coin has two faces. CAAT is subject to certain disadvantages as follows:

As a Audit Software Embedded Program Code Online Program Testing

CONCLUSION

The Chartered Accountancy forum identified a no. of existing challenges based on future outcome that are desirable for sector as a whole but what matters is to overcome those problems in the dynamic environment where cut throat competition implements the principle of " Survival of the Fittest " -:

Recognize the path to success by adapting to the changes and acquiring skills to work with future environment challenges influenced by technological and other challenges. 

The role of CA shall be changed from the past historical focus to more proactive role where finance professionals, strategic thinkers & value adders will succeed.

CA's are required to seek continual professional education relating to their areas of specialization and members in small business will need to broaden their technology skills.