Presentation on theme: "Capacity Building Practical Aspects Capacity Building Practical Aspects Restriction on Disclosure and Use of Data The data in this document contains trade."— Presentation transcript:
Capacity Building Practical Aspects Capacity Building Practical Aspects Restriction on Disclosure and Use of Data The data in this document contains trade secrets and confidential or proprietary information of SARDA & PAREEK, Chartered Accountants, the disclosure of which would provide a competitive advantage to others. As a result, this document shall not be disclosed, used or duplicated, in whole or in part, for any purpose other than to evaluate SARDA & PAREEK. The data subject to this restriction are contained in the entire document. CA Niranjan Joshi J. B. Nagar CPE Study Circle of WIRC of ICAI 23 rd December 2012 Andheri - Mumbai
2 23.12.2012 CA Niranjan Joshi Disclaimer These are my personal views and can not be construed to be the views of the ICAI or my firm. No representations or warranties are made by the WIRC with regard to this presentation These views do not and shall not be considered as a professional advice. This presentation should not be reproduced in part or in whole, in any manner or form, without our written permission.
3 23.12.2012 CA Niranjan Joshi Present Scenario Over Dependence on Statute Based Audits Tax Audits, VAT Audit, Bank Audits, Company Audit, PSU audit Increasing Competition within Profession Increased Cost of Attest Function Increasing Compliance with Technical Standards Stagnated Fees Structure Reduction in availability of Quality Human Talent Increased compliance requirement
4 23.12.2012 CA Niranjan Joshi Questions for us Has my firm identified business goals (2013 and beyond)? Have we developed long-term strategies for securing our position in the market? Have we thought about competition? Have we thought about growing compliance requirements (DTC, IFRS, GST, Companies Act, SAP)?
5 23.12.2012 CA Niranjan Joshi The Changing Scenario The Business Environment today is characterized by Change. Economies, Markets, Industries and Companies are being transformed for ever. Convergence has blurred Industry structures. The definition of competition has changed for ever. Its time to re define our strategies
6 23.12.2012 CA Niranjan Joshi Clients Expectation from Practice Units Experience, Expertise and Efficiency Multi – location presence One Stop Solution Size / Back up / Team / Alternatives Capacity Building
7 23.12.2012 CA Niranjan Joshi Does the size Matters?
8 23.12.2012 CA Niranjan Joshi ICAI – Capacity Building Measures Capacity Building Measures 2005 NetworkingMergers Management Consultancy Services Companies
9 23.12.2012 CA Niranjan Joshi Capacity Building Reading & Research Development Specialization / Expertise Sharing Resources / Knowledge Pool Human Talent Infrastructure, Mkt Requirement / Challenges Ability to Handle Complex /diverse areas Ability to Handle Volume assignments Ability to reach across state / country
10 23.12.2012 CA Niranjan Joshi Concept - Capacity Building For CA Firms Story of Hare & Tortoise Fast and Consistent will always beat the slow and steady Work to your competencies Pooling resources and working as team will always beat individual performers Never give up when faced with failure Compete against situation not against rival Be STRATEGIC
11 23.12.2012 CA Niranjan Joshi Important Points to Achieve VISION Invest time for development Realise your true value Identify what client needs Be proactive, rather than being reactive Position yourself appropriately Specialise in one area - Value added service, over compliance related Invest in knowledge domain, technology & infrastructure Be an entrepreneur, prepare to invest first Determine Revenue to Profit Ratio first
12 23.12.2012 CA Niranjan Joshi ICAI – Capacity Building Measures Networking of CA Firms Merger of CA Firms Corporate form of Practice
13 23.12.2012 CA Niranjan Joshi Concept of Networking Honey Bee Nest Polyclinic
14 23.12.2012 CA Niranjan Joshi Concept of Networking of CA Firms A & Co A & Affiliates B & Associates CD & Co
15 23.12.2012 CA Niranjan Joshi Concept Joining together of CA firms with the objective of displaying collective resources. Each firm to retain independent status Network to act as facilitation and not to do business on own Registration with ICAI
16 23.12.2012 CA Niranjan Joshi Objective To capture the emerging opportunities of globalization To achieve the sustainable growth To create large firms which are able to provide services to larger organization To provide One Stop Shop in prevailing competitive global service market.
17 23.12.2012 CA Niranjan Joshi What should I look for when Networking? Geography / Location Specialisation / Expertise
18 23.12.2012 CA Niranjan Joshi Roadmap Identifying Firm/ Members Meeting of Minds Presentation by all the members identifying their Strengths / Weaknesses / Resources / Clients / Financials / Area of Interest / Ideas Discussion on Vision Commonality of Goals / Objectives Agreement – Roles and Responsibilities Income Sharing Trial Period not more than 3 years Successful Implementation
19 23.12.2012 CA Niranjan Joshi ICAI Guidelines Can a Proprietor join a network? Proprietory / Partnership as well as individual members are allowed to join network Can I join more than one network? Allowed to join only one Formal network Can we pull all the resources for pitching for work? Can show combined strength of network members as a pool of resources, manpower, expertise and location
20 23.12.2012 CA Niranjan Joshi ICAI Guidelines Who can sign the report? Only the firms forming network are eligible to issue / sign / attest any Certificate / Report / professional Document / Assignment. What are the procedures for formation of network? Declaration to be submitted in prescribed format Distinct name is approved by ICAI & Affiliates should be used as suffix instead of & Co or & Associates Ethical compliance is must
21 23.12.2012 CA Niranjan Joshi Contents Networking of CA Firms Merger of CA Firms Corporate Form of Practice
23 23.12.2012 CA Niranjan Joshi Background Recommendation Naresh Chandra Committee Legal Limitations- Partnership Act, 1932 Limited Liability Partnerships (LLP) Merger to precede Demerger Formal Documentation of Merger Demerger to be recognised Demerger to be in built in Merger Demerged Entity to be entitled to Same Name Restoration of Seniority possible
24 23.12.2012 CA Niranjan Joshi Concept Merger of CA firms in One Partnership Firm with the objective of displaying collective resources. Only One Firm remains in existence Firm will work on its own and carry out business of its own (not merely facilitation) Registration with ICAI / Partnership Deed Objective and Roadmap similar to Networking
25 23.12.2012 CA Niranjan Joshi Contents Networking of CA Firms Merger of CA Firms Corporate Form of Practice
26 23.12.2012 CA Niranjan Joshi Concept Permitted by ICAI w.e.f. 1 st October 2006 Permitted Practicing CAs to render Management Consultancy and Other Services by issuing guidelines for practice in Corporate Form. Management Consultancy Company (MCC) shall restrict itself only to Management Consultancy and Other Services permitted by the council in pursuance to section 2(2)(iv) of the Chartered Accountants Act, 1949. The object clause shall restrict itself to such services only and an undertaking to that effect shall be given by such company.
27 23.12.2012 CA Niranjan Joshi Corporate Form of Practice Statistics All provisions of the Companies Act, 1956 and other laws are applicable to a company formed under the act shall be applicable to MCC MCC not permitted to advertise, not to use logo. Members to retain full time COP besides being Managing Director / Whole Time Director of MCC Member continue to train Article / Audit Assistant No restriction on quantum of equity holding of member either individually or with relatives in such company.
28 23.12.2012 CA Niranjan Joshi Corporate Form of Practice Statistics MCC shall apply for name approval Form G Name to indicate area of Management Consultancy & Other Services After name approval registration with ICAI in Form H Ethical compliance is must Notification No. 1-CA(7)/60/2002 dated 8 th March 2002 regarding ceiling on Non-Audit Fees is applicable in relation to MCC
29 23.12.2012 CA Niranjan Joshi Practical Issues – Capacity Building Lack of awareness Lack of Guidance Sharing of Resources (Infrastructure, Competency, Human Resources) Financial Constraints Conflict of interest Less control over work carried out by other affiliates of the Network
30 23.12.2012 CA Niranjan Joshi Practical Issues – Capacity Building Appointment, Powers & Functions of the Managing Committee of the Network Administration / Operating Procedures of Network Contribution of membership fees to meet administration cost of the Network HR Policies Dispute settlement procedure Identifying Engagement Partner to be responsible for assignments of the Network Issuing training materials, newsletters etc. to affiliates of the Network
31 23.12.2012 CA Niranjan Joshi Practical Issues – Capacity Building Common library for the member firms Appointment of Technical Director to make references Peer Review of the member firms Determine methodology for drawing resources from each member firm Compensation to member firms for resources to be drawn from them Development of software, database etc. for member firms.
32 23.12.2012 CA Niranjan Joshi Objectives of Merger Fusion of two or more existing CA firms to: develop core competencies to render professional services of a large range spread over bigger geographical area. To make provision for the growth engine: to enable conversion of small to medium firms to enable conversion of medium to large firms. Expansion of Client base of the practicing units Enhance the group profitability in long term A merged big entity will always be superior to a network arrangement.
33 23.12.2012 CA Niranjan Joshi Advantages of Merger As a growth engine Merger of CA firms enables growing firms in conversion of small firms to medium firms and medium firms to large firms. Merger provides with the firms a competitive edge to capture opportunities arising out of globalization. Merger enables consolidation of experience, expertise, manpower, financial and infrastructure resources thereby leading to creation of large firms which are able to deliver one stop shop. Risk bearing capacity increases.
34 23.12.2012 CA Niranjan Joshi Advantages of Merger Ability to provide training Investment in technology/infrastructure Promotes specialisation Dependence on large clients reduces Capability to handle assignments of complexity and dynamics Merger is an alternative for growing firms as a growth engine Expansion of Client base of the merged firm Enhance the group profitability in long term
35 23.12.2012 CA Niranjan Joshi Limitations of Merger Selection of firm – finding the right fit Lack of vision The merged entity losses its trade name The Merged Entity loses its seniority forever. Lurking fear that the relationship with the firm pre-merger may not continue to be the same Reluctance to share Specialization Conservative thinking Difficulty in trusting the other professionals competencies
36 23.12.2012 CA Niranjan Joshi Future of SME Firms Limited empanelment based work Limited growth opportunity in statute based work Increased compliance related work Availability / retention of human talent CPE – New Developments / Updates / Technology Specialisation Value adds gaining more importance Networking & Merger is must
37 23.12.2012 CA Niranjan Joshi If we dont act now?
38 23.12.2012 CA Niranjan Joshi DOs Remove I from our minds and think for WE Senior / Junior concept must be redefined Sourcing & Execution must be the core areas Merger should not be only for PSU / Bank Work Private Sector Opportunities should be tapped Admission & Retirement of Partner must be defined
39 23.12.2012 CA Niranjan Joshi Donts Total power should not be put a single partner/individual Multiple power centers /processes should be avoided Avoid creating immoveable properties No ambiguity regarding key areas such as sharing of profits, responsibility, retirement & admission of partners
40 23.12.2012 CA Niranjan Joshi Professional Opportunities International Financial Reporting Standard -Employment -Audit Assignments -Consultancy Banks and Financial Sectors Public Sector Assignments Tenders MNCs in India & Indian MNCs Abroad
41 23.12.2012 CA Niranjan Joshi ICAI – PDC Portal
43 23.12.2012 CA Niranjan Joshi ICAI Capacity Building Initiative
44 23.12.2012 CA Niranjan Joshi Conclusion There is a difference between an objective and actions. Unless you understand your objective, you will be wasting your time in actions. Know your objective first. -Swami Vivekananda
45 23.12.2012 CA Niranjan Joshi Conclusion Take Risks in your life - If you win, you can lead, - If you loose, you can guide. -Swami Vivekananda