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ICAN was created by the CA Act, 1997 to:
●play the role of a regulatory body;
●enhance social recognition and faith in the accounting profession;
●develop, protect, and promote the accounting profession; and
●develop a system of registration, qualifications, and examination of accounting professionals
in consonance with international norms.
The CA Act, 1997 provided for ICAN to be run by a 17-member Council, including 10 members
elected from CAs, four elected from Registered Auditors and three nominated by HMGN on the
recommendation of the Auditor General. The Council has established three standing committees:
Executive Committee; Examination Committee; and Professional Guidance Committee. In addi-
tion, it has created five other committees dealing respectively with: Project Monitoring & Sup-
port; Income Tax; Expert Advisory; Editorial Board; and South Asian Federation of Accountants
(SAFA). Within its permanent structure, there are three departments dealing with Administration,
Examination, and Technical Affairs.
According to Section 45, Chapter XII of the CA Act, 1997, ICAN may be given necessary
directions by HMGN on the functioning and actions of the Institute, and by OAG on develop-
ment, protection and promotion of the accounting profession, which ICAN is obliged to follow.
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These directives are generally limited to administrative and policy directives. HMGN grants as
proportion of total ICAN budget has increased in the three years ended July 2001 as follows:
14.73 percent, 25.04 percent, and 62.41 percent. The big jump in FY2000/01 was caused by
anHMGN contribution to the ADB-funded capacity building project, which assisted ICAN in
setting up accounting and auditing standards committees, training committee members and
others, and drafting a CA examination curriculum of international standard.
ICAN is a member of the SAFA and the Confederation of South Asian and Pacific Accoun-
tants (CAPA), and has as one of the items on top of its agenda the acquisition of membership of
the IFAC. It has been receiving technical assistance from the ICAI under a Memorandum of
Understanding. ICAN started examining students for its own CA qualification in November
2000, adding Nepalese Economics, Nepalese Corporate Law, Nepalese Income Tax, and Value
Added Tax to its CA Foundation Level and CA Intermediate examinations for its examination
scheduled for December 2002 and later. About 252 students have enrolled for the CA Founda-
tion and 102 for the CA Intermediate examinations. In examinations taken in November 2000
and May 2001, eight out of 46 students passed the CA Foundation and two out of five passed the
single group of CA Intermediate.
ICAN deserves a lot of credit for its achievements within a few years of existence. Much of
this progress is due to the dedication and hard work of its members giving generously of their
time to serve on its council and its various committees. Despite all this progress, however, the
challenges facing ICAN are many, and have been well documented. They include:
(a)The CA Act, 1997 setting up ICAN and mandating it to license and regulate accountants
and auditors was predicated on the immediate repeal of the Auditors’ Act 1974, under
which the Auditor General (AG) was mandated to license auditors. ICAN should prepare
a realistic plan to produce more trained accountants and accounting technicians. ICAN
should agree with OAG a reasonable time-frame to repeal the Auditors’ Act. The AG is
convinced that on the implementation of such a plan within a reasonable time frame, the
Auditors’ Act, 1974 needs to be repealed.
(b)More Registered Auditors and accounting practitioners operate outside ICAN than within
it. Thus, decisions of ICAN have no impact on, or relevance to, the vast majority of
accounting and auditing practitioners in the country.
(c)Given what is stated above, the setting of accounting standards and code of conduct, and
professional leadership expected from ICAN has been hard to accomplish.
(d)ICAN is, in any case, in no position to do much about the widespread culture of non-
compliance with accounting/financial reporting regulations in the private sector. Many
leading state-owned and private sector companies have not filed accounts with the Regis-
trar of Companies for several years; transparency of financial statements produced by
many companies is suspect; some of the largest commercial banks have not been publish-
ing audited annual financial statements as required by law.
(e)ICAN still must develop a convincing proposal to integrate the thousands of accountants
and auditors. ICAN’s Business Plan16
explains the integration process of auditors regis-
tered with OAG and chartered accountants who are neither member of ICAN nor regis-
tered with OAG. ICAN already has developed criteria for providing membership to the
chartered accountants and other accountants qualified from other professionally recog-
nized institutes. ICAN now needs to develop a proposal to ensure that induction of regis-
tered auditors is not blocked in future.
(f)ICAN also should broaden its appeal, coverage, and relevance in another sense, that is, to
attract and provide a congenial “home” to accountants in government and those working
in industrial and commercial enterprises.
Business Plan of ICAN was developed with ADB assistance.
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FINANCIALACCOUNTABILITY IN NEPAL 103
(g)The training needs with which ICAN is expected to cope are enormous. Apart from train-
ing, testing, and certifying the various classes of members discussed above, the training
needs involved in the introduction of IAS (or Nepal Accounting Standards) are huge and
costly even for chartered accountants. To be sure, ICAN can contract out much of this
training to the two universities and the Nepal Administrative Staff College (NASC), but it
still has to be involved in accrediting the colleges, approving the courses, and monitoring
the maintenance of appropriate standards. There is also a need to ensure continued pro-
fessional education for all ICAN members.
(h)ICAN’S financial challenges are also quite serious. Its two principal sources of revenue,
member subscriptions and government grants, are inadequate to meet its ongoing operat-
ing costs, let alone the costs of new services. With most chartered accountant members
continuing their contributions to foreign institutes, and the non-chartered accountant
membership declining instead of growing, it is hard to see where the growth in member-
ship subscriptions will come from. ICAN is, however, working on schemes to raise funds
through charges for training courses, practicing certificates, and other member services.
Even the preparation of its strategic plan, and most of the ongoing effort to establish the
capacity to introduce accounting and auditing standards have had to be financed by non-
Nepalese sources. This lack of funding contains the elements of a vicious circle: because it
has so little money, ICAN cannot finance attractive member services; and because it can-
not finance such services, a few members have left, causing revenues to decline even fur-
ther, thus further eroding its functional capacity and attractiveness. Once the Auditors’
Act, 1974 is repealed, it is expected that membership subscriptions will increase as all
Registered Auditors will become the members of ICAN.
Given all the challenges discussed above, perhaps the most important strategic decision the
principal stakeholders (accountants, government, auditors, and the OAG) have to make with
regard to ICAN is: what is the realistic and sustainable role ICAN should aim to play? ICAN is in
danger of drowning in an ocean of unrealistic expectations and unfunded mandates. Its current
resources, human and financial, are totally inadequate to carry out the current expectations of its
stakeholders—establishing and maintaining accounting and auditing standards; establishing and
enforcing codes of conduct for accountants and auditors; providing the full range of member ser-
vices, including advocacy and continued professional education for its members; conducting exam-
inations and issuing certificates; issuing certificates of practice to members; providing leadership to
HMGN in matters of accounting, auditing, taxation, and legislation relating thereto—the list goes
on and on. Hard choices need to be made, and a realistic order of priorities established urgently,
in an effort to match expectations with resources likely to be available on a reliable and sustainable
basis. ICAN should not try to be all things to all people. Many of the activities listed above could
be outsourced, with no serious disadvantage to ICAN members or the national interest. The pos-
sible outsourcing of training was mentioned earlier. Another possible example is that ICAN could
prepare and license its members on the basis of examinations conducted by the Institute of Char-
tered Accountants of other countries (for example, the Institute of Chartered Accountants of
India), modified by the substitution of taxation, law, liquidation, and similar papers based on
Nepalese law in place of papers on law and taxation of other countries.
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