Are commercial professionals failing themselves and the country by not resolving issues?
Let us look at two very important professions – Legal and Audit and understand whether they are pulling their weight in India today. Both these professions need to take corrective measures but one does not see any corrective measures being internally discussed, undertaken or implemented (with Govt / Executive help) or even acceptance within that there is a problem.
- Legal – it would be a joke if one said that the Legal profession (Lawyer / Advocate / Solicitor firms) is something that commands respect in India. In fact, Justice is seen to be not done in India. Go to any Court in India and the matter being argued post acceptance for hearing will be at least a decade and more old. It is quite possible that the matter if it is a tax matter (direct or indirect) – that the provisions today may stand amended or irrelevant today, but the arguments will still go on. Sadly, matters don’t come to closure and years pass before a matter is decided – with the losing party challenging this decision (most probably) in a Higher Court. India as a country has too many criminal provisions for commercial actions and that is creating a lot of problems.
None less than our President, Madam Draupadi Murmu at a senior judges meeting had called attention to the serious lapses in criminal justice in India. People in jail due to inability to pay the bail amounts, judgements not being delivered and matters being pushed back, inability to recognize whether for the purported crime committed is it required that for years the person is kept behind bars in custody awaiting bail payment. Even after judgement delivery the implementation of the judgement is poor. Sadly, one does not see these issues being addressed. Judicial interests don’t seem to find these delays bothersome and hence these are not being addressed. The impact of delayed justice is that powerful parties get emboldened by the feeling that there will be a long time period before judgement is delivered.
The ruling party at the Centre has introduced amendments to Criminal Law practice and sections are being recast. Let us hope they are beneficial for speedy justice.
- Audit – it would be foolish to say that the Audit profession is not a prized and important profession. However, in India and overseas, the profession is coming under severe attack for not performing its Role adequately and safeguarding the interest of Corporate stakeholders. We keep hearing of audit failures to detect fraudulent activity or in quality of disclosures or failure to force accounting principles being followed thru compliance. There are many reasons why internationally Audit has lost it’s way.
Audit emerged as a shield for minority corporate shareholders once the joint stock company with public shareholding became popular. The initial intent was to shield the minority shareholders and ensure there was no loss to Government Tax collections.
Sadly today, Audit is considered as Costs to be controlled and shareholders / management try to minimize the same. Audit firms are also to blame by entering into unhealthy pricing competition. Audit is also the stepping stone to remuneration from more profitable management advisory services. Hence, sometimes unremunerative Audit fees are quoted. Why worldwide all Accounts and Audit Institutes and their member firms choose to ignore this ‘conflict of interest’ is surprising. In fact a Big 4 Accountants firm tried to separate Audit and Management Advisory services but a Partners revolt saw the end of this attempt.
Also, authorities keep increasing load on Audit thru disclosures and compliance requirements. Audit then gets lost in many things and loses it’s primary focus of declaring the entity a ‘going concern’, whether the Accounting Standards and Policies are followed, whether the financial statements values match the books of accounts, whether income and related expenses are captured, whether assets and liabilities reflect real realizable / payable values and whether there are adequate internal controls in place to curb fraudulent practices.
Already, there is so much pressure on Audit professionals that many are not wanting to take up this occupation looking at the Risk Profile. In addition, at least in India an Audit professional (unless he is a partner) gets rather inadequate remuneration. Audit requires personnel with high levels of intellect and application of mind to the demand points expected from Audit. The sum of this is that Audit profession is not getting quality entrants, is low paying and the persons conducting the same are also paid low – a prescription for Disaster. No wonder in India and globally – quality of audit is falling.
Sadly, this issue of Audit profession concerns is not discussed within the Profession or Profession with Govt / Regulators. Everyone takes cover under an argument of ‘complexities not having a simple solution’. Not confronting and resolving matters will never yield a solution. Hiding beneath the cloak of complexities cannot take away the issue of lack of confidence by corporate stakeholders in the Audit Process and Profession. This is of concern to Audit Professionals but also to the corporate stakeholders (shareholders / investors, Financiers, Creditors, employees, Governments). There is yet no replacement as an activity for Audit.
For proper Corporate Governance, Audit has to be saved from further degeneration and the occupation must get back it’s value of supervision and merited certification of financial statements. The entire idea of Audit and what it should cover and certify in the Audit Report needs a revisit and expectations properly understood. For Corporate business and it’s practices to be trusted by society, Audit needs to upgrade sharply while deciding the field and Rules of Audit play.
Views expressed above are the author’s own.
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