CAs, CS' object to notification of Companies Act
While chartered accountants are worried about increased responsibility and accountability under the new Act, cost accountants and company secretaries say they will be rendered superfluous at more than 90% of companies, putting corporate governance at risk. However, others are of the view that the new rules will lead to the opening up of fresh opportunities and ensure that audit quality rises.
Chartered accountants are outraged about mandatory joint audits that force one to take responsibility for the other's faults, company secretaries are furious about the ministry having scrapped the requirement for them in private companies, leading to job losses.
Judicial pronouncements in the past have held that auditors are not bloodhounds, said chartered accountant KS Mehta of SS Kothari Mehta & Co.
"It is practically not feasible for an auditor to make his audit more extensive within the limited timeframe allowed by Sebi (Securities and Exchange Board of India) for adoption of annual accounts than it is already doing," he said. "Companies want to release accounts within 30 days. While joint auditors for the same account may solve the problem to an extent, it is not acceptable by companies as it increases expenses as well as makes coordination more complex."
The new rule making the entire body of partners responsible for any act of negligence by one will have a deleterious effect, he said. "The new rule will only encourage taking up of non-audit work by firms which are not registered and therefore, not subject to the discipline of the ICAI (Institute of Chartered Accountants of India)," said Mehta.
ICAI has found fault with the rotation of auditors that's now required. "The auditors' rotation has (until) now been restricted to certain class of companies, leaving close to 90% of the companies outside the scope of rotation of auditors," said ICAI president C A K Raghu.
Company secretaries say they are the worst affected. About 93% of India's 9 lakh companies are private, no longer needing the statutory services of a company secretary under the new rules.
This will hit corporate governance, they warned.
"This has made the future dark for 35,000 members of the CS institute and 4 lakh students. On the other hand, corporate governance of a large section of corporates is going to take a back seat," said SK Jain, a Mumbai-based company secretary.
Cost accountants have been protesting against the rules from the draft stage itself, claiming that the scope of their work has also been curbed. The corporate affairs ministry is yet to notify the final rules for cost audit leading to confusion among professionals.
"The section regarding cost audit and records has been notified effective April 1, 2014, but the rules governing the same are not," said Amit Apte, central council member of the Institute of Cost Accountants of India. "We are advising companies to follow the old rules till the time final rules for cost audit are notified."
S Santhana Krishnan, chairman of the corporate laws committee of the chartered accountants' institute and member of the rules committee of the corporate affairs minstry, admitted that discharging professional functions will become more difficult.
However, the new rules open up new opportunities, he said.
"Some people have looked at the Act as an employment guarantee scheme. It is inappropriate.
Those who believe they have lost opportunities will actually get more opportunities as per the new rules," said Krishnan. For example, cost accountants can now become internal auditors as well.
Company secretaries and CFOs are part of key management personnel. Chartered accountants will get new consulting opportunities such as financial control, corporate governance etc, he said.
Source Business Standard
RBI implements Bhaskar panel recommendations |
|
Mumbai, 16 April The Reserve Bank of India ( RBI) has asked the Fixed Income Money Market and Derivatives Association of India ( FIMMDA) and the Foreign Exchange Dealers' Association of India (FEDAI) to act as administrators of the Indian rupee interest rate and foreign exchange benchmarks. "To overcome the possible conflicts of interest in the benchmark setting process arising out of the current governance structure of the FIMMDA and FEDAI, an independent body, either separately or jointly, may be formed by FIMMDA and FEDAI for administration of the benchmarks," said RBI. In the case of benchmarks based on polled submissions, FIMMDA and FEDAI may select the benchmark submitters on the basis of their standing, market share in the benchmark/ instrument linked to the benchmark and representative character. And, may put in place a code of conduct specifying various provisions, including hierarchy of data inputs for submissions as recommended by an earlier committee, said RBI. This committee on financial benchmarks was chaired by P Vijaya Bhaskar, executive director of RBI, and the central bank accepted the recommendations. RBI says the benchmark submitters selected by the administrator have to necessarily participate in the polling process and comply with the various provisions specified in the code of conduct. " The benchmark submitters may put in place an internal boardapproved policy on governance of the benchmark submission process. The policy may ensure that clearly accountable personnel at appropriate senior positions, with requisite knowledge and expertise, are responsible for benchmark submissions," said RBI. It has asked these benchmark submitters to put in place an effective conflict of interest policy, which facilitates identification of potential and actual conflicts of interest with respect to benchmark submissions and lays down procedures to be followed for management, mitigation or avoidance of such conflicts. According to RBI, they may establish a maker- checker system to ensure integrity. These benchmark submitters have also been asked by RBI to establish an effective whistleblowing policy to facilitate early detection of any potential misconduct or irregularities in the benchmark data presentations. RBI also asked them to have the benchmark submissions subject to periodic internal audit and, where appropriate, to external audit. Besides, RBI asked for submissions by way of written communications or through robust contribution devices which leave an audit trail, to eliminate possibilities of error. Asks FIMMDA and FEDAI to administer financial benchmarks KEY POINTS |The benchmark submitters have to necessarily participate in the polling process and comply with various provisions specified in the code of conduct |They have to put in place an effective conflict of interest policy facilitating identification of potential and actual conflicts of interest |They also have to establish an effective whistleblowing policy to facilitate early detection of any potential misconduct in benchmark data presentations |Benchmark submissions are subject to periodic internal audit and, where appropriate, to external audit |RBI has asked for submissions by way of written communications or through robust contribution devices which leave an audit trail, to eliminate possibilities of error |
| Avoid gold investment schemes |
|
Buyers are instead better off buying gold ETFs immediately from the market instead. There are various gold investment options being promoted by jewellers and investment companies. Satyug Gold, a new gold retail chain, is offering gold coins and bars at discounts but with a lock- in period for delivery. You will get a discount of 15 per cent with a lock- in of two years, 24 per cent for three years, 30 per cent for four years and 37 per cent for five years. If you " buy" 10g ( for ₹ 29,055, the price on April 15) and allow for delivery after five years, you pay only ₹ 18,588 plus one per cent value- added tax, which works out to ₹ 18,773. You will receive a card and an invoice stating you have booked the gold. The card has your photo and details of purchase ( how much bought, rate at which bought, discount, purity of gold, etc). The scheme is being promoted by the India Bullion and Jewellers Association. Experts, however, are cautious about such schemes. Kunal Kohli, gold analyst with Emkay Financial Services, says the scheme is similar to a futures contract and is a good option for investors because over a five- year period, gold prices will move up. " Gold is a commodity which will do well irrespective of how other assets are performing. But investors must consider it only if a jewellery association will give a guarantee that the delivery will happen, not otherwise. While investing, investors must ask for a stamp to this effect," he says. Another gold purchase scheme on offer is waiver of one instalment plan. For example, against payment of 10 instalments, the jeweller will pay the final 11th instalment. So, if you pay ₹ 5,000 for 10 months, you can buy gold worth ₹ 55,000 after 11 months. But all these schemes are using the time value of money. For example, if you are investing regularly in a monthly investment scheme that provides returns at about 18 per cent per annum, at the end of 11 months, the value of your investment of ₹ 5,000 per month will amount to ₹ 55,000. For a five- year scheme that gives you a discount, consider afixed deposit with a bank instead. For example, if you invest ₹ 18,700 in a bank fixed deposit today, after five years you will get about ₹ 28,000- 29,000, at 9- 9.5 per cent interest which is what banks are currently offering. This is more or less equivalent to the value of gold that you will be purchasing. In other words, jewellers are offering you a financing scheme at regular rates. According to Hitesh Jain, commodity analyst, India Infoline Ltd, the company is perhaps banking on the fact that in the short term, gold prices will come down. " On a conservative basis, prices could come down to ₹ 24,000- 23,000 in about two months. So, by taking the money upfront, the company probably wants to beat the likely correction in prices," he explains. For investment in gold, ETF and gold savings plans are better options. Overall, investment in gold should not exceed 5- 10 per cent of your total portfolio, say experts. PRIYA NAIR Go for ETFs instead, if you want to accumulate the precious metal >YOUR MONEY |
| RIL insider trading case hearing adjourned |
|
Mumbai, 16 April The Securities Appellate Tribunal (SAT), a forum for appealing against the decisions of the Securities and Exchange Board of India ( Sebi), adjourned the hearing on Wednesday of an appeal by Reliance Industries Ltd ( RIL) in an insider trading case. The date of the next hearing is to be announced later. The tribunal asked for clarity on some issues, including the proposal made by an internal committee of the regulator to the High Powered Advisory Committee which decides on the consent application. Sebi has been investigating RIL for profiting from insider information on Reliance Petroleum, a subsidiary company which later merged with RIL. Sebi's probe has been on since 2008. It issued a show- cause notice in 2010. Reliance subsequently sought to settle the matter through the consent mechanism, which allow entities to pay a sum of money to settle charges without admitting or denying guilt. Sebi declined to allow such a settlement and made the changes disallowing settlement of insider trading through the consent route. Reliance then moved SAT against these Sebi moves. The tribunal previously adjourned it on March 18, seeking clarity on the effect of new regulations on the case. The rules say certain offenses, including insider trading, cannot generally be settled through the consent mechanism. The tribunal had sought written submissions on the impact of the rule changes on the case. "Sebi shall not settle the defaults listed below… (including)… insider trading that is violation of Regulation 3and 4 of the Sebi ( Prohibition of Insider Trading) Regulations, 1992," said the circular. The stock market regulator has penalised RIL in a separate case of insider trading to the tune of ₹ 11 crore. Sebi had found after investigations that a subsidiary, Reliance Petroinvestments, had traded in the shares of Indian Petrochemicals before its merger with RIL, as well as the announcement of an interim dividend. |
| Stamp Act revamp to benefit treasury |
|
New Delhi, 16 April The proposed Bill to amend the Indian Stamp Act of 1899 has sought to increase the maximum penalty to ₹ 1 lakh for various offences, compared with a few hundred rupees at present. According to the draft, circulated by the Union finance ministry for comment, if a share warrant is issued without being duly stamped, the penalty on those executing or signing it will increase from ₹ 500 at present to ₹ 1 lakh. In the case of any other instrument chargeable with duty, such as debentures or preferential shares, the fine will be ₹ 10,000. A new section is proposed to be inserted which provides for a fine up to ₹ 1 lakh on any person or association which fails to file a duly stamped clearance list to the state government within a prescribed time and manner or makes a false declaration. A ministry official said once the Bill was enacted, stamp revenue would double to about ₹ 60,000 crore a year, as penalties for various offences under the Act are proposed to be increased substantially. "These penalty rates were introduced in 1899. We have tried to rationalise the amounts," said the official, who did not wish to be identified. In the draft Bill, now likely to be taken up by the next government, a provision has also been made to levy a penalty of up to ₹ 1 lakh for failure to provide the required cooperation in inspection of private and government premises and providing the required information and records ( paper as well as electronic). The fine has also been increased substantially for stamp duty evasion. Currently, the maximum penalty for this is ₹ 5,000. It has been proposed that for an evasion up to ₹ 10 lakh, the fine can be increased to ₹ 50,000 or 20 per cent of the duty evaded, whichever is more. If the evaded amount is more than ₹ 10 lakh, the punishment will involve imprisonment of up to a year or afine of at least ₹ 50,000 or both. "There has to be some deterrent to stop stamp duty evasion and the higher penalty is fair in that sense. It will also add to government coffers," said Rakesh Nangia, managing partner, Nangia & Co. He said the increase would also bring uniformity and rationalisation in penalties across states. Currently, many states levy stamp duty under their own laws. Some such as Assam, Bihar, Odisha and Kerala have adopted the national law. The increase in penalty, if it happens, will be applicable to these states. Some such as Maharashtra, Delhi and Karnataka, which have their own Stamp Acts, had already increased the penalties over the years. "The penalties we have proposed in the draft Bill is in line with what these states have already enforced," added the ministry official. |
This mail and its attachments (if any) are confidential information intended for persons to whom the email is planned for delivery by the sender. If you have received this mail in error please notify the sender of the error by forwarding the email and its attachments (if any) and then deleting the mail received in error and the relevant email trail in this connection without making any copies or taking any prints.
__._,_.___
No comments:
Post a Comment