Professional Body

The definition of Professional Body from Reference.com

“A professional body or professional organization, also known as a professional association or professional society, is an organization, usually non-profit, that exists to further a particular profession, to protect both the public interest and the interests of professionals. The balance between these two may be a matter of opinion. On the one hand, professional bodies may act to protect the public by maintaining and enforcing standards of training and ethics in their profession. On the other hand, they may also act like a cartel or a labor union (trade union) for the members of the profession, though this description is commonly rejected by the body concerned.”

The first half of the definition is very sweet and text book type definition what the public knows about and second is what the professional body does.

I am writing this blog in particular reference to Indian Accounting bodies.

There was a reference by RV in CMA Yahoogroups “How many prerogatives and previlages can one body enjoy ? in a democracy-craving” with reference to ICAI, India. To which I found one of the reports in DCA website sharing same concerns.

3.02 In most countries, the regulatory role is carried out, to greater or lesser degree, by professional bodies representing certified public accountants. Whilst in some countries the regulator is a re are merely voluntary “non-statutory” self self-regulating organisation, in some others they are creatures of a specific statutes. In IndiaHere, the Institute of Chartered Accountants of India (ICAI) has been set up under the Chartered Accountants Act, 1949, to examine and regulate the profession. Similarly, the Institute of Company Secretaries of India (ICSI) has been set up under the Company Secretaries Act, 1980, to regulate its members. Analogously, and the cost accountants are regulated by the Institute of Cost and Works Accountants of India (ICWAI)Institute of Cost and Works Accountants of India (ICWAI) regulate the cost accountants. Indeed, these three professional organisations are statutory bodies created by acts of Parliament, and not mere self-regulating organisations.

3.09 The opinions expressed by those who met with the Committee were split along the middle: one set of people fervently advocated the setting up of an independent Public Accounting Oversight Board, while another — most notably, many chartered accountants, argued otherwise.

In India, we have only one Accounting body that conducts financial audits, frames accounting standards and behave like a bully …. trade union tendencies (I am coming to second part of definition).

Read the statements of President of ICAI. Read CAinIndia

The RBI move has huge ramifications for accounting and audit firms in India and adversely affects their business. “Almost 35-40% of CA firms, especially the smaller ones, will be hit by the RBI directive,” said the ICAI president Sunil H Talati.

Read Financial Express

“We believe internal auditing is the sole prerogative and core competency of a chartered accountant. No other professional body should be allowed to provide such services,” Talati said.

Read Hindu Business Line ICAI opposed name change of ICWAI with objections that word “Management” would create confusion. ICAI Act does not explain anything about the word “Chartered” but it changed from Registered Accountant to Chartered Accountant in 1950. They forgot India is a republic and ICAI is the only govt. recognised body in the country that uses the word “Chartered”. Read my earlier blog.

You may notice the ICSI Act

Pursuant to section 383A of the Companies Act, 1956, companies with a paid-up share capital of Rs.Two crores or more are compulsorily required to appoint a whole time Company Secretary who must he member of the Institute of Company Secretaries India.

Every company having a paid-up share capital of Rs.Ten Lakhs or more but less than Rs.Two Crores, is required to engage the services of a Secretary in Whole-time Practice for issue of compliance Certificate.

My question is why a paid employee of a company who functions a company secretary be a law professional or member of other accounting bodies in India. When you practise as a company secretary, then you should be a company secretary from ICSI… but is the case when in employment.

The Companies Act does not have any minimum qualification for “Director” !!!

ICWAI is slow mover in every area concerned and tries to catch with everybody.

The above discussion has been focussed on professional body acting like a cartel.

The second question is

“professional bodies may act to protect the public by maintaining and enforcing standards of training and ethics in their profession”

Do you feel

• that standards of training good accounting bodies in India ?
• Monitoring of Practising Firms about quality standards
• Effective displicinary actions against the erring professionals
• Read Disciplinary Misconduct in this report
  

As a consumer you do not have choice to hire services of accounting professions other than ICAI since there is no other accounting institute in India.

Now India should move towards having a Regulatory Authority/Board for Accounting & Audit Standards and more than one accounting bodies. The quality of bodies should be monitored by the Regulatory Authority so that the professional institutes do not not behave like cartel. And the public would be benefitted.

Your views please.

Regards,

Santosh Puthran

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Professional Body….

The definition of Professional Body from Reference.com

“A professional body or professional organization, also known as a professional association or professional society, is an organization, usually non-profit, that exists to further a particular profession, to protect both the public interest and the interests of professionals. The balance between these two may be a matter of opinion. On the one hand, professional bodies may act to protect the public by maintaining and enforcing standards of training and ethics in their profession. On the other hand, they may also act like a cartel or a labor union (trade union) for the members of the profession, though this description is commonly rejected by the body concerned.”

The first half of the definition is very sweet and text book type definition what the public knows about and second is what the professional body does.

I am writing this blog in particular reference to Indian Accounting bodies.

There was a reference by RV in CMA Yahoogroups “How many prerogatives and previlages can one body enjoy ? in a democracy-craving” with reference to ICAI, India. To which I found one of the reports in DCA website sharing same concerns.

3.02 In most countries, the regulatory role is carried out, to greater or lesser degree, by professional bodies representing certified public accountants. Whilst in some countries the regulator is a re are merely voluntary “non-statutory” self self-regulating organisation, in some others they are creatures of a specific statutes. In IndiaHere, the Institute of Chartered Accountants of India (ICAI) has been set up under the Chartered Accountants Act, 1949, to examine and regulate the profession. Similarly, the Institute of Company Secretaries of India (ICSI) has been set up under the Company Secretaries Act, 1980, to regulate its members. Analogously, and the cost accountants are regulated by the Institute of Cost and Works Accountants of India (ICWAI)Institute of Cost and Works Accountants of India (ICWAI) regulate the cost accountants. Indeed, these three professional organisations are statutory bodies created by acts of Parliament, and not mere self-regulating organisations.

3.09 The opinions expressed by those who met with the Committee were split along the middle: one set of people fervently advocated the setting up of an independent Public Accounting Oversight Board, while another — most notably, many chartered accountants, argued otherwise.

In India, we have only one Accounting body that conducts financial audits, frames accounting standards and behave like a bully …. trade union tendencies (I am coming to second part of definition).

Read the statements of President of ICAI. Read CAClubIndia

The RBI move has huge ramifications for accounting and audit firms in India and adversely affects their business. “Almost 35-40% of CA firms, especially the smaller ones, will be hit by the RBI directive,” said the ICAI president Sunil H Talati.

Read Financial Express

“We believe internal auditing is the sole prerogative and core competency of a chartered accountant. No other professional body should be allowed to provide such services,” Talati said.

Read Hindu Business Line ICAI opposed name change of ICWAI with objections that word “Management” would create confusion. ICAI Act does not explain anything about the word “Chartered” but it changed from Registered Accountant to Chartered Accountant in 1950. They forgot India is a republic and ICAI is the only govt. recognised body in the country that uses the word “Chartered”. Read my earlier blog.

You may notice the ICSI Act

Pursuant to section 383A of the Companies Act, 1956, companies with a paid-up share capital of Rs.Two crores or more are compulsorily required to appoint a whole time Company Secretary who must he member of the Institute of Company Secretaries India.

Every company having a paid-up share capital of Rs.Ten Lakhs or more but less than Rs.Two Crores, is required to engage the services of a Secretary in Whole-time Practice for issue of compliance Certificate.

My question is why a paid employee of a company who functions a company secretary be a law professional or member of other accounting bodies in India. When you practise as a company secretary, then you should be a company secretary from ICSI… but is the case when in employment.

The Companies Act does not have any minimum qualification for “Director” !!!

ICWAI is slow mover in every area concerned and tries to catch with everybody.

The above discussion has been focussed on professional body acting like a cartel.

The second question is

“professional bodies may act to protect the public by maintaining and enforcing standards of training and ethics in their profession”

Do you feel

• that standards of training good accounting bodies in India ?
• Monitoring of Practising Firms about quality standards
• Effective displicinary actions against the erring professionals
• Read Disciplinary Misconduct in this report
  

As a consumer you do not have choice to hire services of accounting professions other than ICAI since there is no other accounting institute in India.

Now India should move towards having a Regulatory Authority/Board for Accounting & Audit Standards and more than one accounting bodies. The quality of bodies should be monitored by the Regulatory Authority so that the professional institutes do not not behave like cartel. And the public would be benefitted.

Your views please.

Regards,

Santosh Puthran
AICWA

Read Full Post »

Navi Mumbai Association of CMA have new website

Congrats !!! Navi Mumbai Association of CMAs have their new website www.icmai.org . It is good to see that Cost & Management Accountants are becoming IT savvy and sharing information through internet. The audience and spread of knowledge will be more through internet.

Personally I feel it is a neatly designed website with good colour combination. The links at the bottom of the website viz. home members students jobs events articles news contact about us faq add url resources sitemap are quite good. Information about meetings are also provided which is good so that the members will know about the activities.

I think some of the pages have to be tidied like http://www.icmai.org/events.htm, http://www.icmai.org/addurl.htm which is in some foreign language. News updates should be for Accounting/Finance or Chapter updates rather than of entire world.

I feel the contact information can be improved e.g.

http://www.icmai.org/contact.htm have rediffmail and yahoo ids. Similarly the Committe members page http://www.icmai.org/committee.htm do not have email ids of committee members.

Web designers can explore the possibility of using Google Apps which is free. Email ids will be personalised for each committee member and office bearers. See Google Apps for more details http://www.google.com/a/ and Discussion Thread. Also web designers can explore the possibility of having RSS feeds for the website.

Once again Navi Mumbai CMA keep the good job up.

Regards,

Santosh Puthran
AICWA

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Learning Curve Theory

Learning Curve Theory is concerned with the idea that when a new job, process or activity commences for the first time it is likely that the workforce involved will not achieve maximum efficiency immediately. Repetition of the task is likely to make the people more confident and knowledgeable and will eventually result in a more efficient and rapid operation. Eventually the learning process will stop after continually repeating the job. As a consequence the time to complete a task will initially decline and then stabilise once efficient working is achieved. The cumulative average time per unit is assumed to decrease by a constant percentage every time that output doubles. Cumulative average time refers to the average time per unit for all units produced so far, from and including the first one made.

Major areas within management accounting where learning curve theory is likely to have consequences and suggest potential limitations of this theory.

Areas of consequence:

• A standard costing system would need to set standard labour times after the learning curve had reached a plateau.
• A budget will need to incorporate a learning cost factor until the plateau is reached.
• A budgetary control system incorporating labour variances will have to make allowances for the anticipated timechanges.
• Identification of the learning curve will permit the company to better plan its marketing, work scheduling, recruitment and material acquisition activities.
• The decline in labour costs will have to be considered when estimating the overhead apportionment rate.
• As the employees gain experience they are more likely to reduce material wastage.

Limitations:

• The stable conditions necessary for the learning curve to take place may not be present – unplanned changes inproduction techniques or labour turnover will cause problems and affect the learning rate.
• The employees need to be motivated, agree to the plan and keep to the learning schedule these assumptions may not hold.
• Accurate and appropriate learning curve data may be difficult to estimate.
• Inaccuracy in estimating the initial labour requirement for the first unit.
• Inaccuracy in estimating the output required before reaching a ‘steady state’ time rate.
• It assumes a constant rate learning factor.

I am posing a simple problem, please reply by pressing on comments for answer

ABC Motors Ltd has designed a radically new concept in racing bikes with the intention of selling them to professional racing teams. The estimated cost and selling price of the first bike to be manufactured and assembled is as follows:

$
Materials 1,000
Assembly Labour (50 hours at $10 per hour) 500
Fixed Overheads (200% of Assembly labour) 1,000
Profit (20% of total cost) 500
–––––
Selling Price $ 3,000
–––––
ABC Motors Ltd plans to sell all bikes at total cost plus 20% and the material cost per bike will remain constant irrespective of the number sold.

ABC Motors Ltd’ management expects the assembly time to gradually improve with experience and has estimated an 80% learning curve. A racing team has approached the company and asked for the following quotations:

1. If we were to purchase the first bike assembled, and immediately put in an order for the second, what would be the price of the second bike?
2. If we waited until you had sold two bikes to another team, and then ordered the third and fourth bikes to be assembled, what would be the average price of the third and fourth bikes?
3. If we decided to immediately equip our entire team with the new bike, what would be the price per bike if we placed an order for the first eight to be assembled?

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Learning Curve Theory

Learning Curve Theory is concerned with the idea that when a new job, process or activity commences for the first time it is likely that the workforce involved will not achieve maximum efficiency immediately. Repetition of the task is likely to make the people more confident and knowledgeable and will eventually result in a more efficient and rapid operation. Eventually the learning process will stop after continually repeating the job. As a consequence the time to complete a task will initially decline and then stabilise once efficient working is achieved. The cumulative average time per unit is assumed to decrease by a constant percentage every time that output doubles. Cumulative average time refers to the average time per unit for all units produced so far, from and including the first one made.

Major areas within management accounting where learning curve theory is likely to have consequences and suggest potential limitations of this theory.

Areas of consequence:

• A standard costing system would need to set standard labour times after the learning curve had reached a plateau.
• A budget will need to incorporate a learning cost factor until the plateau is reached.
• A budgetary control system incorporating labour variances will have to make allowances for the anticipated timechanges.
• Identification of the learning curve will permit the company to better plan its marketing, work scheduling, recruitment and material acquisition activities.
• The decline in labour costs will have to be considered when estimating the overhead apportionment rate.
• As the employees gain experience they are more likely to reduce material wastage.

Limitations:

• The stable conditions necessary for the learning curve to take place may not be present – unplanned changes inproduction techniques or labour turnover will cause problems and affect the learning rate.
• The employees need to be motivated, agree to the plan and keep to the learning schedule these assumptions may not hold.
• Accurate and appropriate learning curve data may be difficult to estimate.
• Inaccuracy in estimating the initial labour requirement for the first unit.
• Inaccuracy in estimating the output required before reaching a ‘steady state’ time rate.
• It assumes a constant rate learning factor.

I am posing a simple problem, please reply by pressing on comments for answer

ABC Motors Ltd has designed a radically new concept in racing bikes with the intention of selling them to professional racing teams. The estimated cost and selling price of the first bike to be manufactured and assembled is as follows:

$
Materials 1,000
Assembly Labour (50 hours at $10 per hour) 500
Fixed Overheads (200% of Assembly labour) 1,000
Profit (20% of total cost) 500
–––––
Selling Price $ 3,000
–––––
ABC Motors Ltd plans to sell all bikes at total cost plus 20% and the material cost per bike will remain constant irrespective of the number sold.

ABC Motors Ltd’ management expects the assembly time to gradually improve with experience and has estimated an 80% learning curve. A racing team has approached the company and asked for the following quotations:

1. If we were to purchase the first bike assembled, and immediately put in an order for the second, what would be the price of the second bike?
2. If we waited until you had sold two bikes to another team, and then ordered the third and fourth bikes to be assembled, what would be the average price of the third and fourth bikes?
3. If we decided to immediately equip our entire team with the new bike, what would be the price per bike if we placed an order for the first eight to be assembled?

Click on Comments and answer.

Regards,

Santosh Puthran
AICWA

Read Full Post »

Profit Smoothing….

It is now the year end for many companies and the accountants will very busy finalising their company’s accounts. You may be very busy to read all of it but I would write in this article… you may find it informative.

Creative Accounting is a dirty word in accounting …. but the world ‘creative’ is good in the real world. So year end… and companies want to present a very good picture of state of affairs of the company to their shareholders… and the directors would expect that their accountant workout their creative minds in this definitive purpose…. This practise is know as ‘Profit Smoothing‘

Some of the common methods:

• Setting up a provision for possible future expenditure. This was then taken to the profit and loss account artificially to enhance profits in the subsequent periods.
• Recognising profits on long term contracts before they are completed provides opportunities for profit smoothing.
• Extraordinary items are large unusal items from items from events or transactions that fall outside the scope of ordinary activities of the business and not expected to recur.
• A company that has large changes in revenue will usually use profit smoothing. This involves moving current income to the future. For example, suppose the company is a video game company, and they get massive revenue “spikes” when a game is released, but relatively low sales the rest of the time. The company will spread the money from the “spikes” out over the year, so that their revenue shows a steady increase from year to year. Using profit smoothing is legal, but can be abused.
• Accounting Scandals: Click here
• Fraud Basic: Click here
  

Share some of the profit smoothing practises you have come across by commenting on the blog, so other fellow accountants would also know and share their thoughts.

Profit Smoothing practices …. not recommended.

Regards,

Santosh Puthran

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Profit Smoothing….

It is now the year end for many companies and the accountants will very busy finalising their company’s accounts. You may be very busy to read all of it but I would write in this article… you may find it informative.

Creative Accounting is a dirty word in accounting …. but the world ‘creative’ is good in the real world. So year end… and companies want to present a very good picture of state of affairs of the company to their shareholders… and the directors would expect that their accountant workout their creative minds in this definitive purpose…. This practise is know as ‘Profit Smoothing‘

Some of the common methods:

• Setting up a provision for possible future expenditure. This was then taken to the profit and loss account artificially to enhance profits in the subsequent periods.
• Recognising profits on long term contracts before they are completed provides opportunities for profit smoothing.
• Extraordinary items are large unusal items from items from events or transactions that fall outside the scope of ordinary activities of the business and not expected to recur.
• A company that has large changes in revenue will usually use profit smoothing. This involves moving current income to the future. For example, suppose the company is a video game company, and they get massive revenue “spikes” when a game is released, but relatively low sales the rest of the time. The company will spread the money from the “spikes” out over the year, so that their revenue shows a steady increase from year to year. Using profit smoothing is legal, but can be abused.
• Accounting Scandals: Click here
• Fraud Basic: Click here

Share some of the profit smoothing practises you have come across by commenting on the blog, so other fellow accountants would also know and share their thoughts.

Profit Smoothing practices …. not recommended.

Regards,

Santosh Puthran
AICWA

Read Full Post »

This is a nice one I got on internet.

This is a nice one I got on internet.

“Work as if you don’t need money
-Love as if you’ve never been hurt
-Dance, as if nobody can see you,
-Sing, as if no one can hear,
-Live, as if the Earth was a heaven.”

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Discuss GST Hot topic in India today

I think that it is time today to discuss Goods and services tax its formulation and implementation by 2010.Practitioners should come forward on this topic.

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Can We discuss GST which is Hot today in India

I think that it is time today to discuss Goods and services tax its formulation and implementation by 2010.Practitioners should come forward on this topic.

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