VOLUME 72 NO.

05 PAGES -116 NOVEMBER 2023 `100

JOU R NAL OF TH E I N STITUTE OF CHARTE R E D ACCOU NTANTS OF I N D IA

Partnering Economic Growth and

Social Progress

ICAI - SET UP BY AN ACT OF PARLIAMENT


THE CHARTERED ACCOUNTANT
ICAI- Weaving the Tapestry of National Development
N
ational development is akin to crafting the
tapestry of nurturing a self -sustainable
ecosystem promoting the principle of
equality, inclusivity, and accountability. Each thread
in this tapestry symbolizes various essential
functions that must be meticulously managed. The
ultimate outcome will manifest as equality,
prosperity, and harmony across all segments of the
nation.
The ICAI is acutely aware of the vital role played by
every facet of the financial sector and is consistently
working with meticulous attention to bolster the
participation of the financial sector in the nation’s
development. As an institution, we are building the
competence and capacity across the key drivers of
the growth like accounting, GST, MSME, Financial
and Tax literacy, sustainability & social development,
startups and working to strengthen digital economy
framework by setting standard of FAIS. The ICAI
has also introduced Vitiyagyaan, an educational
initiative aimed at imparting financial knowledge to
anyone eager to learn. These teachings not only
enrich the understanding of the common person
but also serve as a source of motivation for them to
manage their finances more effectively, thereby
contributing to the nation’s progress.
Furthermore, the ICAI has launched a 75-day MSME
Yatra program with the objective of fostering the
growth and capacity enhancement of Micro, Small,
and Medium Enterprises. The ICAI MSME Yatra is
focused on synchronizing and leveraging the
various elements of excellence that drive innovation
and entrepreneurship in this sector. Additionally, the
ICAI has introduced the MSME SETU Program, a
platform that facilitates connections between
various stakeholders and MSMEs through MSME
Camps and help desks, catering to both newly
established and well-established MSMEs. ICAI
strives to address every relevant aspect to ensure
comprehensive support. Various financial sectors
require tailored solutions to become effective
contributors. ICAI has furnished standards,
guidance notes, and other professional resources
to address diverse aspects of this endeavour.
In the complex and interconnected world of finance,
the profession plays a vital role which is highlighted
in the confidence awarded by the stake holders on
the profession. Being silent architects of economic
www.icai.org
547
stability, the profession is upholding its
responsibility for the integrity of financial
systems and ensuring fiscal responsibility. The
profession, by virtue of its expertise and
dedication, emerges as true partner in the
endeavour of nation-building. The profession
serves as guardians of fiscal responsibility,
meticulously auditing financial records, and
ensuring compliance with laws and regulations.
The ICAI plays pivotal role in implementing
checks and balances which helps mitigate and
intercept risks stemming from technological and
environmental shifts, thereby safeguarding the
nation’s economic well-being from potential
adverse consequences.
The profession has made its mark by making
through demanding time of crises. As the world
grapples with economic downturns, recessions,
or even global pandemics, The Profession is at
EDITORIAL
the forefront, helping individuals and
organizations navigate these turbulent times. Its
ability to assess risks, manage resources
efficiently, and plan for contingencies is an
invaluable asset for the nation. In addition to its
core professional responsibilities, the profession
often finds itself contributing to society in
various other capacities. Many Members
participate in philanthropic activities, taking up
leadership roles in charitable organizations, and
contributing to social welfare. Their commitment
to the well-being of the nation extends beyond
their professional duties.
The Institute of Chartered Accountants of India
shines as a symbol of excellence and a dynamic
catalyst for economic advancement within our
nation. The ICAI strives to illuminate crucial
factors, allowing stakeholders to perceive the
true situation and identify opportunities. ICAI’s
unwavering dedication and expertise are
fundamental pillars bolstering our path towards
economic growth and stability. ICAI’s global
perspective, embodied in the Garuds’ focus,
equips professionals to plan, prepare, and
perform at a worldwide level, positioning them
at the forefront of the accounting profession on
the global stage.
-Editorial Board ICAI: Partner in Nation Building
NOVEMBER 2023 3
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THE CHARTERED ACCOUNTANT

VOLUME 72 NO. 05 PAGES -116 NOVEMBER 2023 `100

569 GST: Simplifying Taxes and Amplifying Progress

- CA. Sushil Kumar Goyal

574 Charting Pathways to Prosperity: Financial & Tax

JOU R NAL OF TH E I N STITUTE OF CHARTE R E D ACCOU NTANTS OF I N D IA

Partnering Economic Growth and

Social Progress
Literacy for Inclusive Development
- CA. Abhay Kumar Chhajed
- CA. Umesh Ramnarayan Sharma

579 Developing New Age Professional Accountants

- CA. Vandana D. Nagpal
- CA. Priya Subramanian
- CA. Shefali Jain
ICAI - SET UP BY AN ACT OF PARLIAMENT

NOVEMBER 2023
IN THIS ISSUE... RISK MANAGEMENT
VOICE 586 Fraud Risk Management
- CA. Partho Sathi Ghosh

547 Editorial
- ICAI- Weaving the Tapestry of National
Development
550 From the President
TECHNOLOGY
CONTENT

592 Chartered Accountants: Can AI Replace

Them?
MEMBERS
- CA. Mohit Sharma

554 Photographs 595 ERP Implementation:

Strategies for Efficiently
558 Know Your Ethics Managing Business
Operations
630 Opinion
- CA. Kapil Swarankar
636 Classifieds

CORPORATE GOVERNANCE
UPDATES
601 Earning Quality & Corporate Governance
636 Accountant’s Browser Disclosure: A Study of the Indian Real Estate
Sector
638 Legal Updates - Dr. Smita Tripathi
- Legal Decisions - Dr. Abhishek Kumar Singh
- Circulars and Notifications

THEME AUDIT
561 IBC: Resilience to Revolution 606 How to deal with misstatements identified
- CA. (Dr.) Ashok Kumar Mishra during the Audit
- CA. Nilanjan Paul
565 Augmenting Economic Governance through
Accountancy Excellence
- CA. Manoj Fadnis

4 NOVEMBER 2023 www.icai.org

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THE CHARTERED ACCOUNTANT

CONTENT
VOLUME 72 NO. 05 PAGES - 116 NOVEMBER 2023 `100

EDITOR-IN-CHIEF CA. ANIKET SUNIL TALATI

Editor-In-Chief
JOINT EDITOR CA. RANJEET KUMAR AGARWAL
Joint Editor
MEMBERS CA. VISHAL DOSHI
CA. MANGESH PANDURANG KINARE
CA. PRITI SAVLA
CA. RAJENDRA KUMAR P
CA. SRIPRIYA KUMAR

PUBLIC FINANCE CA. (DR.) DEBASHIS MITRA

CA. ABHAY CHHAJED
CA. PRAKASH SHARMA
611 Transition to Accrual Accounting: Models and CA. KEMISHA SONI
learnings for Urban Local Bodies CA. (DR.) RAJ CHAWLA
- CA. (Dr.) R S Murali CA. HANS RAJ CHUGH
- CA. Ashok Rao CA. CHARANJOT SINGH NANDA
CA. (DR.) SANJEEV KUMAR SINGHAL
DR. P. C. JAIN
CA. M. DEVARAJA REDDY
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CA. MANISH AKHILRAY BAXI

SUSTAINABILITY CA. RUTVIJ P. SHAH

CA. SHAH DILIPKUMAR VADILAL

ICAI EDITORIAL TEAM: KUNAL SHARMA, SECRETARY, EDITORIAL BOARD

616 EU Carbon Tax and its Impact on the Indian
Industry DR. NEETU SINGH, ASSISTANT SECRETARY

- CA. Manas Chugh THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA

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655
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ACCOUNTANT are those of the authors and do not necessarily reflect those of
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www.icai.org NOVEMBER 2023 5

 550
FROM THE PRESIDENT
CA. Aniket Sunil Talati
President, ICAI
Dear Professional Colleagues,
The ascent of our nation and economy on the
global landscape is a matter of immense pride
and satisfaction. Today, the whole world is
watching and listening to our opinion and holds
reverence for our growing economic prowess. As
per IMF, the Indian economy will continue to grow
fastest among large economies, and India is
expected to contribute about 18% of the global
growth by 2028. We rank third in the world
‘startup’ ecosystem and emerging as one of the
most attractive investment destination, leading
manufacturing hub. As I reflect upon the rise of
India on the global stage, I am elated and feel
proud that our profession is emerging as an
active contributor in shaping the economic
landscape of our great nation. Our professionals
have diligently ensured that the financial
disclosures and the reports which form the basis
of a prudent financial or investment decision
adhere to international standards, best practices
and policies making India an attractive destination
for foreign investment.
Since inception, the Institute of Chartered
Accountants of India (ICAI) has been playing a
crucial and proactive role in the economic progress
and development of the nation. Reflecting upon
the words of ICAI Past President Shri G. Basu,
“We are fully alive to the responsibilities, duties,
and obligations of the chartered accountants to
the government, to the public in general and to
6 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
their clients and we are doing and would do our best
to see that the expectations are duly fulfilled.” We
have been diligently shouldering and discharging the
responsibility of not only supporting the nation’s
growth and development but also upholding the faith
and confidence of its citizens.
Over the years, our profession has shaped this
narrative of turning Ambitions into Actions by
supporting the government with invaluable insights
for sound policy formulation and implementation of
its various schemes, leading to growing tax
collections, compliance and successful
implementation of GST reforms paving the path of
growth for economic development. Similarly, as
trusted business advisors, the profession is
augmenting the competence, capacity, and
capabilities of MSMEs & Startups. We are striving to
attain financial awareness by educating and
empowering individuals through Financial & Tax
literacy drive. Also, the profession has been
steadfastly enhancing the governance by supporting
the institutions and local government entities in
imbibing and incorporating best practices. The
profession has truly come to represent itself as
Partner in Nation Building.
As we move forward, as an Institution and profession
embodying pursuit of excellence, we continue to
evolving, embracing new technologies, nurturing
new skills, and methodologies in the era shaped by
sustainability, the digital economy, technology, and
rising global expectations.
Let’s have a look at some of the developments that
have taken place during the last month:
ICAI receives Prestigious UNCTAD ISAR
Honours Award at World Investment Forum
With immense pleasure and pride, I wish to inform
you all that the ICAI’s initiative “Sustainability
Reporting Standards Board (SRSB)” received an
Award in UNCTAD ISAR Honours Ceremony at the
World Investment Forum on 17th October 2023 at
Abu Dhabi. ICAI received the highest score in this
year’s session of ISAR HONOURS among 70
initiatives from all over the world.
ISAR Honours award of UNCTAD celebrates
innovative developments, raises awareness, and
promotes national and global best practices in
sustainability and SDG reporting. On behalf of the
fraternity and ICAI it was a true honour to receive this
Award. This is indeed a true acknowledgement and
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THE CHARTERED ACCOUNTANT
recognition of the various and continuous initiatives
undertaken by the ICAI in the area of Sustainability
which has attracted attention & accolades from one
and all.
ICAI also had its pavilion at the World Investment
Forum wherein various initiatives and publications of
ICAI, the much awaited event of GloPAC and global
presence of ICAI and its members were showcased
and highly appreciated by the delegates.
Development Initiatives for Profession
● Technical Guide on Reports of Audit Under
Section 12A/10(23C) of the Income-tax
Act, 1961
ICAI has long been committed to advancing the
knowledge and honing the skills of its members. In
line with this, we are mindful of the recent
amendments in the compliance regulations for
Charitable Trusts and Institutions under the Income-
tax Act, 1961, which also witnessed the re-
notification of Form No. 10B and 10BB. Notably, the
updated Form No. 10B and 10BB, released in the
final week of August, now demand detailed reporting.
Understanding the intricacies of these forms and
ensuring the smooth fulfilment of the statutory
obligations associated with them has been a priority
for ICAI. To this end, the Direct Taxes Committee
(DTC) has released the “Technical Guide on Reports
of Audit Under Section 12A/10(23C) of the Income-
tax Act, 1961”. This comprehensive guide provides
an invaluable resource for understanding the audit
reports required under Sections 12A and 10(23C).
Further, in order to resolve the issues being faced by
members in filling these audit forms, a series of Live
Webinars on Form No. 10B and 10BB were also
organised in the month of September and October
2023. These webinars served as a platform for
members to gain a practical understanding of the
revised forms and the associated reporting
requirements.
� MoU with IGNOU
The Institute through its Board of Studies
(Academic), has renewed the Memorandum of
Understanding (MoU) with Indira Gandhi
National Open University (IGNOU) in a ceremony
on 9th October 2023, which has flourished since
2007. I along with CA. Ranjeet Kumar Agarwal,
Vice President, ICAI & CA. (Dr.) Debashis Mitra,
Immediate Past President, ICAI exchanged the
MoU with Prof. Nageshwar Rao, Vice-Chancellor,
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551
FROM THE PRESIDENT
IGNOU in the presence of CA. Vishal Doshi and
CA. Dayaniwas Sharma, Chairman and Vice-
Chairman respectively of Board of Studies
(Academics), ICAI Central Council members,
Govt. Nominees, and senior officials from
IGNOU.
Under this renewed MoU, ICAI students will be
eligible for credit transfer for courses they have
completed through ICAI, up to 50% of the total
credits of the IGNOU programme. This initiative
underscores ICAI’s commitment to evolve with
the changing educational landscape and
aligning the curriculum with the principles of the
National Education Policy (NEP) 2020. Credit
transfers will be facilitated on a course-to-
course basis for Foundation, Intermediate and
Final level courses.
Over the years, this MoU has made a significant
impact, with more than 48,000 ICAI students
successfully completing the B.Com.
(Accountancy & Finance) course and more than
8,000 students completing the M.Com. (Finance
& Taxation) course through IGNOU. This
collaboration reflects our commitment to quality
commerce education in the country.
� Augmenting Audit Compliance Framework –
CAQ Utilities
With a view to enhance the competence of firms
in serving clients and improve the quality of
Audit compliance, the Centre for Audit Quality
Directorate has recently launched two valuable
tools/utilities namely Review & Monitoring Tool
for ‘Standards on Auditing Compliance’ and
‘Utility on Engagement Letters’. The utilities will
enable the firms to manage the audit process
and documentation in an effective and efficient
manner. ICAI remains dedicated to providing
resources and support to the members in
navigating these complex regulatory changes.
Leadership at CAPA
I, along with ICAI Past President CA. Prafulla Chhajed
attended the CAPA Members and Assembly of
Delegates meetings held in Colombo on 5-6 October
2023 to discuss and deliberate on the recent
economic developments in the region and work
towards supporting the economic progress in the
region. In a heartening development, ICAI Past
President CA. Prafulla P. Chhajed has been elected
as President CAPA and I have been elected as Board
Member of CAPA.
NOVEMBER 2023 7
552
FROM THE PRESIDENT
Global Professional Accountants
Convention (GloPAC)
We express our gratitude for the remarkable response
that event has garnered from across the globe with
about 3700 delegates from 27 countries and India,
registering for the event and it is expected to grow
further, as we are approaching GloPAC this month.
GloPAC is a unique opportunity for professional
accountants from around the world to come together
and deliberate upon realigning and redefining the
role of profession as a catalyst to value creation for
the global economy. The convention will delve
deeper into the challenges and opportunities that
the profession is facing today and how accountants
can continue to raise the bar and play a leading role
in driving economic growth and development.
We look forward to welcoming all the delegates and
global accounting leadership at this magnificent event
and shall strive to make it a Festival of Ideas, Insights
and Innovations which aspires and inspires the
financial ecosystem move to the next orbit of progress.
Stakeholders’ Engagement – Supporting
Progress & Growth
In today’s evolving business milieu, working in
tandem with stakeholders is essential to progress
and achieve success by leveraging each other’s
competence and resources. At the institute, we keep
on collaborating with stakeholders to foster a culture
of oneness in building a robust and resilient economy.
� MoU with State Taxes Department, Jammu &
Kashmir
The Institute, through GST & Indirect Taxes
Committee, has entered into a MoU with State
Taxes Department, Jammu & Kashmir (J&K) on
October 1, 2023. The MoU aims to strengthen
the taxation system in the state and promote
transparent and better services to taxpayers by
providing support in capacity building, skill
development and knowledge sharing.
The MoU was exchanged in the presence of
Shri Manoj Sinha, Hon’ble Lieutenant Governor,
Jammu & Kashmir, Dr. Arun Kumar Mehta, Chief
Secretary, J&K, Shri Santosh D Vaidya, Principal
Secretary, Finance, J&K, CA. Ranjeet Kumar
Agarwal, Vice-President, ICAI, and CA. Sushil
Kumar Goyal Chairman, GST & Indirect Taxes
Committee, CA. Umesh Sharma, Vice-Chairman,
GST & Indirect Taxes Committee and CA. (Dr.)
Raj Chawla, Central Council Member.
8 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
� Supporting Women Entrepreneurship –
Statement of Intent (SOI) with NITI Aayog
The Institute continuing its support to Women
Entrepreneurship in the country has signed a
Statement of Intent (SOI) with NITI Aayog,
through its Professional Development
Committee (PDC) on 3rd October, 2023 in Goa in
the presence of Dr. Pramod Sawant, Hon’ble
Chief Minister of Goa, Shri B V R Subrahmanyam,
CEO, NITI Aayog, Ms. Anna Roy, Senior Advisor,
NITI Aayog, CA. Prasanna Kumar D, Chairman,
PDC and CA. Mangesh P. Kinare, Vice-Chairman,
PDC. Under the said arrangement, the ICAI shall
provide its professional expertise through a
panel of experts to the women entrepreneurs
registered with the Women Entrepreneurship
Platform (WEP) of the NITI Aayog, as well as its
infrastructure and resources across the country
for creating awareness about WEP.
� MoU with FICCI Ladies Organisation (FLO)
The ICAI through its Group for Promoting
Financial & Tax Literacy has renewed its
collaboration with the FLO for the second
consecutive year. Both the organisations shall
be working together to create financial & tax
literacy awareness amongst the women by way
of knowledge dissemination and skill
development to empower them and achieve the
goal of financial inclusion in true essence.
� Trade Officers Round Table Conclave
Chartered Accountants plays a pivotal role in
boosting global trade in services and ICAI partners
with the government to enhance international
recognition of Indian accountants. Through its
Committee for Development of International Trade,
Services, and WTO, ICAI undertakes various
initiatives to promote export of goods and services
aligned with the nation’s economic policies.
In this context, a Trade Officers’ Roundtable
Conclave was held in New Delhi on October 25,
2023, and witnessed the participation of 35
trade officials from various embassies along
with representatives from Export Promotion
Councils and Overseas Chamber of Commerce.
The ICAI’s role in facilitating global trade,
bilateral trade enhancement, investment
promotion, and capacity-building for accounting
professionals was highlighted along with
exchange of MoU (renewal) with Export
Promotion Council for EOUs and SEZs.
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THE CHARTERED ACCOUNTANT

Bolstering India’s entrepreneurial
landscape – MSME & Startup Initiatives
In an extensive effort to bolster India’s entrepreneurial
landscape and journey of self-reliance, the Institute
has launched two significant initiatives to strengthen
the MSME and Startup ecosystem in the country.
The ICAI MSME Connect Program, started from
October 20, 2023, to February 10, 2024, aims to
support our members who advise Micro, Small &
Medium Enterprises (MSMEs) on entering
international trade and boosting exports. It includes
the ICAI MSME Niryat program, assisting potential
exporters with mentoring and counselling, and the
ICAI MSME Sahayog program, which provides
support in terms of skills and quality, market access,
finance availability, and technology know-
how, among the many other things.
Simultaneously, the ICAI Startup Yatra commenced
from October 20, 2023, to February 10, 2024, aims to
create enabling ecosystems and enhance the capacity
of startups in 140 cities. This includes the ICAI Startup
Manthan and ICAI Startup Samvad programs,
fostering innovation, registration, and capacity
building for startups. These initiatives intend to bridge
the gap between tier I and tier II city ecosystems,
fostering a thriving entrepreneurial culture.
FROM THE PRESIDENT
meaningfully with stakeholders. I am pleased to inform
you that ICAI has successfully launched its Official
Whatsapp Channel. With this, ICAI now has presence
on Nine Social Media Platforms namely Twitter,
LinkedIn, Facebook, Koo, Instagram, Telegram,
YouTube, Threads and WhatsApp with combined
follower count of around 22 lakhs and counting.
Partnering Economic Growth and Social
Progress
As the former President of our Institute CA. Y. H.
Malegam said, “...the primary objective of our
education and training processes should be to
produce a well-rounded professional who gets
integrated into the society of which he is a part. In the
pursuit of our education activities… we must always
be conscious of the fact that the output from our
profession has to be of direct benefit to Government
as well as to society in general and industry in
particular.” In our role as partners in nation building,
we understand that driving future growth necessitates
a strong commitment to developing human capital.
Our dedication to nurturing young talents and
upholding ethical principles ensures that we meet
India’s visionary goals for 2047. We understand and
acknowledge that we are the architects of an
economically resilient and progressive India.

International Research Awards 2023 I compliment the athletes’ bringing laurels to India in
the Asian games, wherein India won its highest ever
The Institute through its Research Committee had
number of medals. Reflecting on the recent
organised the 4th edition of the ICAI International
performance at the games, we’re reminded of the
Research Awards 2023 to acknowledge the exemplary
virtues of discipline, perseverance, and resilience. In
contributions to the fields of accountancy and other
sports, or the profession, it’s these qualities that
allied areas, honouring the quest for knowledge and
define the champions. Our profession aligns with the
celebrating the pursuit of wisdom. The award
essence of these virtues, making us optimistic about
ceremony was held on October 19, in Dubai. A total of
our role in shaping the future of India. Together, we’ll
172 nominations were received from 33 countries
continue to build a nation that exemplifies the very
including authors and co-authors of the research
best in growth, progress, and prosperity, leaving a
papers, which is the largest number of nominations
legacy for the future generations to follow.
since the commencement of these awards.
I extend my warmest greetings to everyone as we
The awards were presented to 15 research papers.
step into the festive season. Let’s rejoice in these
Awardees hail from 11 different countries (authors and
moments of happiness and convey the message of
co-authors) including Australia, Benin, Brunei
optimism, harmony, and affection.
Darussalam, France, India, Morocco, New Zealand,
Pakistan, South Africa, Sri Lanka & Tunisia. I urge all Jai Hind, Jai ICAI!
members to develop research skills which will keep us
ahead on the growth curve by being more innovative.

Expanding Social Media Presence

CA. Aniket Sunil Talati
It is our continuous endeavour to leverage technology
President, ICAI
and social media as a part of our communication
strategy to widen our impact & outreach and engage New Delhi, 30 October, 2023
th

www.icai.org NOVEMBER 2023 9

 554
ICAI President CA. Aniket Sunil Talati & ICAI Vice President
CA. Ranjeet Kumar Agarwal along with ICAEW President Mr.
Mark Rhys at the jointly organised Seminar of ICAI & ICAEW on
Globalizing Accountancy: India-UK Collaborations in Digital Age
in London (25.09.2023)
PHOTOGRAPHS
ICAI President CA. Aniket Sunil Talati & ICAI Vice President CA. Ranjeet Kumar Agarwal along with ICAI Central Council
Members, ICAI Secretary and others at the International Affairs Committee meeting held in Gandhinagar, Gujarat. (2.10.2023)
MoU Signing Ceremony with State Taxes Department, Jammu
and Kashmir. Present at Ceremony were Hon’ble LG-UT of
J&K (Chief Guest) Shri Manoj Sinha, ICAI Vice President CA.
Ranjeet Kumar Agarwal, J&K State Tax Department Chief
Secretary Dr. Arun Kumar Mehta, Principal Finance Secretary
Sh. Santosh D. Vaidya, Commissioner Dr. Rashmi Singh, ICAI
Central Council Members CA. Sushil Kumar Goyal, CA. (Dr.)
Raj Chawla & other dignitaries. (1.10.2023)
10 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
ICAI Vice President CA. Ranjeet Kumar Agarwal &
ICAI Central Council Member CA. Abhay Kumar
Chhajed visited the University of London to discuss
about collaborations in areas of mutual interests.
(25.09.2023)
Confederation of Asian & Pacific Accountants (CAPA)
meeting. ICAI President CA. Aniket Sunil Talati seen
with IFAC President Ms. Asmaa Resmouki, ICAI Past
President & CAPA President CA. Prafulla P. Chhajed
and CAPA Immediate Past President Mr. Jim Knafo in
Colombo. (5.10.2023)
Group Photograph of CAPA Board.
Seen in the photograph are ICAI
President CA. Aniket Sunil Talati, ICAI
Past President & CAPA President CA.
Prafulla P. Chhajed, CAPA Immediate
Past President, Mr. Jim Knafo along
with CAPA Board members at the CAPA
Board Meeting in Colombo. (5.10.2023)
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 555

THE CHARTERED ACCOUNTANT

PHOTOGRAPHS
ICAI President CA. Aniket Sunil
Talati & ICAI Vice President CA.
Ranjeet Kumar Agarwal along with
ICAI Central Council Members CA.
C. V. Chitale, CA. Durgesh Kumar
Kabra, CA. Mangesh Kinare, CA.
Priti Savla and CA. Piyush Chhajed
at the Interactive Meet organised by
Bombay Chartered Accountants’
Society. (7.10.2023)

ICAI President CA. Aniket Sunil Talati & ICAI Vice President
CA. Ranjeet Kumar Agarwal along with ICAI Past President
ICAI President CA. Aniket Sunil Talati & ICAI Vice President
CA. Nihar N. Jambusaria and ICAI Central Council Members
CA. Ranjeet Kumar Agarwal along with ICAI Central Council
CA. C. V. Chitale, CA. Durgesh Kumar Kabra, CA. Priti
Members CA. Mangesh Kinare and CA. Priti Savla and
Savla and CA. Piyush Chhajed visited and interacted with
Managing Committee Members of the Thane Branch of WIRC of
members at the Borivali (Central) CPE Study Circle of WIRC
ICAI at Interactive Meet held in Thane. (7.10.2023)
of ICAI. (7.10.2023)

ICAI President CA. Aniket Sunil Talati & ICAI Vice President CA. Ranjeet Kumar Agarwal along with ICAI Past President CA.
Nilesh S. Vikamsey, ICAI Central Council Members CA. Dheeraj Khandelwal, CA. C. V. Chitale, CA. Hans Raj Chugh, CA.
Durgesh Kumar Kabra, CA. Priti Savla, CA. Piyush Chhajed, ICAI Past Central Council Member CA. Shriniwas Y. Joshi and ICAI
officials at the Training Programme organised by FRRB in Mumbai. (7.10.2023)

ICAI President CA. Aniket Sunil Talati & ICAI Vice President
CA. Ranjeet Kumar Agarwal along with ICAI Central Council
Members CA. C. V. Chitale, CA. Durgesh Kumar Kabra, CA.
Mangesh Kinare, CA. Umesh Sharma and CA. Piyush Chhajed
at the Two Days National Conference on GST in Nashik.
(8.10.2023)
ICAI President CA. Aniket Sunil Talati & ICAI Vice President
CA. Ranjeet Kumar Agarwal along with IGNOU Vice
Chancellor Prof. Nageshwar Rao at the MoU signing and
exchange ceremony between ICAI and IGNOU in the
presence of ICAI Central Council Members and Officials of
ICAI & IGNOU at ICAI Head Office, New Delhi. (9.10.2023)

www.icai.org NOVEMBER 2023 11

556
PHOTOGRAPHS
ICAI President CA. Aniket Sunil Talati along with ICAI Past Presidents
CA. Ashok K. Chandak, CA. Sunil H. Talati & CA. Jaydeep N. Shah,
ICAI Central Council Members CA. Durgesh Kumar Kabra, CA.
Mangesh Kinare & CA. Umesh Sharma, Chairman and Managing
Committee Members of the Nagpur Branch of WIRC of ICAI at the
National Conference on Real Estate Transactions & Emerging in
Nagpur.(13.10.2023)
ICAI President CA. Aniket Sunil Talati & ICAI Vice President CA. Ranjeet
Kumar Agarwal with the Chief Guest Shri Sharanabasappa Gouda
Darshanapur , Hon’ble Cabinet Minister, Small Scale Industries &
Public Enterprises, Government of Karnataka unveiling the Conference
Souvenir at the 55th Regional Conference of SIRC of ICAI. Also seen
in the photograph are ICAI Central Council Member CA. Cotha S.
Srinivas, Chairman and Members of the SIRC of ICAI. (12.10.2023)
ICAI President CA. Aniket Sunil Talati & ICAI Vice President CA.
Ranjeet Kumar Agarwal with the Chief Guest Shri Sharanabasappa
Gouda Darshanapur , Hon’ble Cabinet Minister, Small Scale Industries
& Public Enterprises, Government of Karnataka being felicitated
at the 55th Regional Conference of SIRC of ICAI. Also seen in the
photograph are ICAI Central Council Member CA. Cotha S. Srinivas,
Chairman and Members of the SIRC of ICAI. (12.10.2023)
12 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
ICAI President CA. Aniket
Sunil Talati & ICAI Vice
President CA. Ranjeet
Kumar Agarwal & ICAI
Central Council Members
along with IGNOU Vice
Chancellor Prof. Nageshwar
Rao and Officials of ICAI
& IGNOU at the MoU
exchanging ceremony
between ICAI and IGNOU
at ICAI Head Office, New
Delhi. (9.10.2023)
ICAI President CA. Aniket Sunil Talati & ICAI
Immediate Past President CA. (Dr.) Debashis Mitra
meeting with H.E. Mr. Sunjay Sudhir, Ambassador
of India and Mr. A Amarnath Dy. Chief of Mission in
Abu Dhabi. (17.10.2023)
ICAI President CA. Aniket Sunil Talati along with Chair
Edinburgh Group & Chairman Jury, research award
Mr. Shahied Daniels, Secretary, AFA & Member - Jury,
research award Dr. Tharatee Mookdee, ICAI Past
President & CAPA President CA. Prafulla P. Chhajed,
ICAI Immediate Past President CA. (Dr.) Debashis Mitra,
ICAI Central Council Members CA. (Dr.) Anuj Goyal , CA.
Cotha S. Srinivas and ICAI Secretary CA. (Dr.) Jai Kumar
Batra at the 4th ICAI International Research Awards in
Dubai. (19.10.2023)
ICAI President CA. Aniket Sunil Talati, along with
ICAI Past President CA. Jaydeep N. Shah, ICAI
Central Council Member CA. Durgesh Kumar Kabra,
Managing Committee Members of the Nagpur Branch
of WIRC of ICAI & other dignitaries, interacted with
Members of Chartered Accountants’ Fraternity at the
Members Meet in Nagpur. (13.10.2023)
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 557

THE CHARTERED ACCOUNTANT

PHOTOGRAPHS

ICAI President CA. Aniket Sunil Talati receives
the prestigious UNCTAD ISAR Honours Award on
behalf of ICAI for its contribution in Sustainability
during the 8th World Investment Forum held in Abu
Dhabi. (17.10.2023)
ICAI President CA. Aniket Sunil Talati along with ICAI Immediate Past
President CA. (Dr.) Debashis Mitra and ICAI Central Council Members
CA.(Dr.) Rajkumar S. Adukia, CA.(Dr.) Anuj Goyal, CA. Dheeraj Kumar
Khandelwal, CA. (Dr.) Sanjeev Kumar Singhal, CA. Priti Savla, CA. Cotha
S. Srinivas at the prestigious UNCTAD ISAR Honours Award awarded
to ICAI for its Sustainability initiatives during the 8th World Investment
Forum held in Abu Dhabi. (17.10.2023)

ICAI President CA. Aniket Sunil

Talati along with IFAC President
Ms. Asmaa Resmouki, ICAI
Immediate Past President CA.
(Dr.) Debashis Mitra and ICAI
Central Council Members CA.
(Dr.) Rajkumar S. Adukia, CA.
(Dr.) Anuj Goyal, CA. Dheeraj
Kumar Khandelwal, CA. (Dr.)
Sanjeev Kumar Singhal, CA. Priti
Savla, CA. Cotha S. Srinivas at
the prestigious UNCTAD ISAR
Honours Award Ceremony
during the 8th World Investment
Forum held in Abu Dhabi.
(17.10.2023)

ICAI President CA. Aniket Sunil Talati with ICAI Immediate
Past President CA. (Dr.) Debashis Mitra and ICAI Central
Council member CA. Dheeraj Kumar Khandelwal at the 8th
World Investment Forum held in Abu Dhabi. (17.10.2023)
ICAI President CA. Aniket Sunil Talati & ICAI Vice President
CA. Ranjeet Kumar Agarwal presenting memento to CA.
Suresh Prabhu, Chancellor Rishihood University and Former
Union Minister at the Annual International Conference of ICAI
Doha Chapter of ICAI. Also seen in the photograph are Past
ICAI Central Council Member CA. Jay Chhaira and ICAI Doha
Chapter Chairman CA. Vignesh & ICAI Doha Chapter Vice
Chairman CA. Kamlesh. (26.10.2023)

Photographs of Conference on
Professional Excellence in a
Dynamic World, Abu Dhabi. Seen
in the photographs are Chief
Guest Hon’ble Chief Minister,
Government of Uttarakhand
Shri Pushkar Singh Dhami, ICAI
President CA. Aniket Sunil Talati,
ICAI Immediate Past President
CA. (Dr.) Debashis Mitra, ICAI
Central Council Members and
Managing Committee Members
of the ICAI UAE (Abu Dhabi)
Chapter. (18.10.2023)

www.icai.org NOVEMBER 2023 13

558
KNOW YOUR ETHICS
1. Whether communication on E-mail would
suffice the requirement of Clause (8) of
Part-I of First schedule to the Chartered
Accountants Act, 1949?
A. The requirement of communication under Clause
(8) of Part-I of First Schedule to the Chartered
Accountants Act, 1949 is deemed to be complete
on the delivery of communication to the previous
auditor. Accordingly, members are required to
communicate in such a manner as to retain in
their hands positive evidence of the delivery
of the communication to the addressee. With
regard to communication through E-mail, the
communication would be deemed as complete
on receipt of acknowledgement from the previous
auditor’s E-mail address registered with the
Institute or his last known official E-mail address.
2. What will be the position if the Incoming
Auditor sends an E-mail, however, does
not receive an acknowledgement from the
Previous Auditor?
A. In such situation, it would not be reckoned as
valid communication, as the positive evidence
of delivery is not available.
3. Whether the Incoming Auditor can send
request for acknowledgement of receipt of
communication from the Previous Auditor?
A. Yes, the incoming auditor can send request for
acknowledgement of receipt of communication
from the previous auditor. However, it would be
deemed as positive evidence of delivery only if
the previous auditor accepts the request and
sends acknowledgement.
14 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
4. Whether the Incoming Auditor may
commence the Audit immediately after
receiving acknowledgement from the
Previous Auditor?
A. As the communication through E-mail is instant,
the receipt of acknowledgement will be a valid
proof of delivery as well as entitlement to
acceptance of the Audit, unless of course, the
previous auditor has raised some objection(s) to
such change.
5. What shall be the duty of the Retiring Auditor
in case Incoming Auditor requests to provide
known information regarding any facts or
other information before deciding on the
acceptance of the engagement?
A. As per Council directions in Paragraph
2.14.1.8(viii) under Clause (8) of Part-I of the
First Schedule to the Chartered Accountants
Act, 1949, appearing in Volume-II of the Code
of Ethics, on the request of the incoming
auditor to the retiring auditor for providing
known information regarding any facts or other
information of which, in the opinion of the
retiring auditor, the incoming auditor needs to
be aware before deciding whether to accept the
engagement, the retiring auditor shall provide
the information diligently.
6. What are the professional reasons for not
accepting Audit?
(Refer FAQ No. 12 printed in October 2023 issue
of CA Journal. The portion in italics is being
reproduced as appearing in Volume-II of the
Code of Ethics under Clause (8) of Part-I of the
www.icai.org

THE CHARTERED ACCOUNTANT
First Schedule to the Chartered Accountants
Act, 1949 for detailed guidance)
A. The professional reasons for not accepting an
audit would be:
(a) Non-compliance of the provisions of Sections
139 and 140 of the Companies Act, 2013 as
mentioned in Clause (9) of the Part - I of First
Schedule to The Chartered Accountants Act,
1949; and
(b) Non-payment of undisputed Audit Fees by
auditees other than in case of Sick Units
for carrying out the Statutory Audit under
the Companies Act, 2013 or various other
statutes; and
(c) Issuance of a qualified report.
In the first two cases, an auditor who accepts
the audit would be guilty of professional
misconduct. In this connection, attention of
members is invited to the Council General
Guidelines, 2008 appearing in Chapter-4. In
the said Guidelines, Council has explained
that the provision for audit fee in accounts
signed by both the auditee and the auditor
along with other expenses, if any, incurred by
the auditor in connection with the audit, shall
be considered as “undisputed audit fee” and
“sick unit” shall mean a unit registered for not
less than five years, which has at the end of
any financial year accumulated losses equal to
or exceeding its entire net worth.
In the last case, however, he may accept the audit
if he is satisfied that the attitude of the previous
auditor was not proper and justified. If, on the
other hand, he feels that the previous auditor had
qualified the report for good and valid reasons,
he should refuse to accept the audit. There is no
rule, written or unwritten, which would prevent
an auditor from accepting the appointment
offered to him in these circumstances. However,
before accepting the audit, he should ascertain
the full facts of the case. For nothing will bring
the profession to disrepute so much as the
knowledge amongst the public that if an auditor
is found to be “inconvenient” by the client, he
could readily be replaced by another who would
not displease the client and this point cannot be
too over-emphasised.
Printing Visiting Cards, Stationery, and Letter
Heads.
7. Whether a Firm of Chartered Accountants
can use catchwords/ catchphrases on its
website, Letter heads and visiting cards?
A. The mention of catchwords / catchphrases
(for e.g., excellence in a particular area,
Firm having professionals of integrity etc.) on
www.icai.org
559
KNOW YOUR ETHICS
Firm’s website, Letter heads and visiting cards
is not permissible in view of the provisions of
Clauses (6) and (7) of Part-I of the First Schedule
to the Chartered Accountants Act, 1949. It may
be noted that the above catch words are only
indicative and not exhaustive.
8. Can a member/ Firm of Chartered
Accountants print his/its vision and values
behind the visiting cards?
A. No, since such printing of vision and values
behind the visiting cards may result in
solicitation and violation of the provisions
of Clause (6) of Part-I of First Schedule to
the Chartered Accountants Act, 1949.
9. Can a Chartered Accountant in practice
advertise his professional attainments or
services, or can he use any designation or
expression other than Chartered Accountants
on professional documents, visiting cards,
letter heads or sign boards, etc.?
A. No, as per Clause (7) of Part-I of the First
Schedule to the Chartered Accountants Act,
1949, a Chartered Accountant shall be deemed
to be guilty of professional misconduct, if he
advertises his professional attainments or
services, or uses any designation or expressions
other than chartered accountant on professional
documents, visiting cards, letter heads or sign
boards, unless it be a degree of a University
established by law in India or recognized by
the Central Government or a title indicating
membership of the Institute of Chartered
Accountants or of any other institution that has
been recognized by the Central Government or
may be recognized by the Council.
However, the member in practice may advertise
through a write-up setting out the services
provided by him or his firm and particulars of his
firm subject to such guidelines as may be issued
by the Council.
10. Can a Chartered Accountant in practice give
the date of setting up the practice or date of
establishment on the letterheads and other
professional documents, etc.?
A. No, Council direction under Paragraph 2.14.1.7(iv)
of Clause (7) of Part- I of the First Schedule to
the Chartered Accountants Act,1949, appearing
in Volume-II of Code of Ethics prescribes that the
date of setting up of the firm on the letterheads
and the professional documents, etc. should not
be mentioned. However, in the Website, the year
of establishment can be given.
11. If a member is a partner in more than one
firm, is it permissible to print the names of
NOVEMBER 2023 15
560
KNOW YOUR ETHICS
all the firms on visiting cards, letter-heads,
stationery etc.?
A. Yes, there is no violation under Clause (7) of
Part-I of the First Schedule to the Chartered
Accountants Act, 1949.
12. Whether a member in practice/ Firm of
Chartered Accountants is permitted to use
logo on letter heads, stationery, etc.?
A. No, the use of logo/monogram of any kind/form/
style/design/colour etc. whatsoever on any
display material or media e.g., paper stationery,
documents, visiting cards, magnetic devices,
internet, signboard by the members in practice
and/or a firm of Chartered Accountants, is
prohibited. Use/printing of member/firm name
in any other manner tantamounting to logo/
monogram is also prohibited. However, a
common CA logo has been allowed to the
members, provided it is used in the correct
manner within terms of the Council guidelines.
13. Whether members of the Institute can use
common CA logo?
A. Yes, the common CA logo can be used by
all members, whether in practice or not.
Encapsulating the current beliefs, attitudes and
values of the profession, the CA logo seeks to
enhance the identity of the members. The logo
consists of the letters ‘CA’ with a tick mark
(upside down) inside a rounded rectangle with
white background.
16 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
14. Which designation(s) can be mentioned
by a member in practice empanelled as
Insolvency Professional on his visiting cards,
letter heads and other communication?
A. A member in practice empanelled as Insolvency
Professional can mention “Insolvency
Professional” on his visiting cards, letter heads
and other communication, as this is recognized
by the Central Government in terms of Clause
(7) of Part-I of First Schedule to the Chartered
Accountants Act, 1949. Mention of any
other nomenclatures/designations, including
membership of any IPA is not allowed.
15. Can a member in practice print QR (Quick
response) code on his visiting cards,
facilitating easy access to information?
A. Yes, printing of QR Code on the visiting Cards
is permissible, provided that it does not contain
information that is not otherwise permissible to
be printed on a visiting Card.
16. If a member has passed any additional
course of the ICAI, is he permitted to print
such qualification on visiting cards, letter
heads and other stationery?
A. It is not permissible for a member to mention the
name of certificate course of the ICAI cleared
by him. However, wherever diploma is awarded
by the ICAI, the same can be mentioned on the
visiting cards, letterheads, and other stationery.
E.g. DISA (ICAI).
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 561

THE CHARTERED ACCOUNTANT

THEME

IBC: Resilience to Revolution

CA. (Dr.) Ashok Kumar Mishra
Member of the Institute
As all of us may be fully aware that on 1st June 2016, NCLT
was constituted under the Companies Act, 2013 & the IBC
(Insolvency And Bankruptcy Code) came into force on 28th
May 2016. The NCLT (National Company Law Tribunal) was
notified as the Adjudicating Authority under the IBC provisions
w.e.f. 1st December 2016.
A look back reveals that the build-up of economic policy
commenced with The Industrial Policy Resolution of 1948,
creation of the Planning Commission in 1950 & five year
plan from 1951, ending of the license raj - 1991 budget,
disinvestment of the PSU from 1999, creation of NITI Aayog
on 1st January, 2015, one nation-one market GST - 1st July,
2017 & introduction of the IBC - 1st December 2016 – all of
which are a form of the Indian economic improvement system.

T
he bankruptcy laws
commenced with the
setting up of the BIFR
under SICA 1985 to check-up
business sickness (misused
Moratorium in the Debtor in
control model), followed by
Lok Adalat under the Legal
Services Authorities Act 1987
(attempting amicable settlement
with limited success and a low
recovery rate). Even setting
up of the DRT in 1993 (setting
up dedicated recovery forum
to ensure expeditious claim
settlement), SARFAESI ACT
2002 (Embedded concept of
creditor in possession) did
not yield reduction in the NPA
or revival of sick organisation
due to multiple factors. It is
a well known fact that as per
the internet in USA, 8 out of
10 startups fail but it neither
brings stigma, nor disheartens
entrepreneurship. Hence, the
IBC was put into force based
on the report submitted by Dr.
T.K. Viswanathan Committee
constituted on 22.08.2014 on
the Bankruptcy Law Reforms.
The IBC is conceptually based
on the experiences gained
from all the failures or system
deficiencies observed under the
previous, & the then existing
corporate & economic legislation
apart from the prevailing
practices followed in other
jurisdictions, particularly the UK
as also UNCITRAL Guide on
INSOLVENCY LAW.
Being a former technical
member of both the NCLT/
NCLAT, there was initially a lot of
reluctance on business houses
that the IBC may work as per
the Draconian economic law &
will lead to the closure of even
healthy business organisations
such as DEBT & DEFAULT,
which is a common feature in
every business. Even a cash-
to-cash working capital cycle
delay can result in enforcing
the CIRP. No doubt, I have seen
cases brought out on NCLT /
NCLAT Benches that were of
such nature where competitors,
disgruntled employees, and
chasers of payments wanted
to misuse the provisions of the
IBC to either build pressures for
releasing payments or putting
pressure on the organisations.
The Indian judiciary is strong
enough to withstand the misuse
of law. The Hon’ble Supreme
Court vide various judgements
amplified the provisions of the
IBC. A few are cited below:
1. Section 9 of the code was a
bit vulnerable where the IBC
requires that the debt must
be due & payable in law & it
must be unpaid as well as it
must not be disputed:
Mobilox Innovations Private
Ltd. Vs Kirusa Software
Private Ltd. (SC) Civil Appeal
no. 9405 of 2017 –
A dispute must truly exist
in the facts and should not
be spurious, hypothetical, &
illusory.
Dispute, or the suit, or
arbitration proceedings must
be pre-existing, prior to the
receipt of the Demand Notice.
Disputed Debt is a sub judice
arbitral award at the time of
the issuance of the Demand

www.icai.org NOVEMBER 2023 17

562
THEME
Notice also bars Section 9
Application.
M/s. Jai Balaji Industries vs.
D. K. Mohanty & Anr. (2021)
165 CLA 312 (SC)
Disputed Debt leads to
rejection of the petition for the
initiation of CIRP when the
claimed amount is disputed
and arises out of Arbitral
proceedings, culminating
in the rejection of the claim
against the petitioner.
Transmission Corporation
of Andhra Pradesh vs.
Equipment Conductors &
Cables Ltd. (2018) 147 CLA
112 (SC)
Disputed Debt exists as valid
& real is enough to set aside
Section 9 Application, so far
as the merits of contention
of the dispute is immaterial.
Kay Bouvet Engineering Ltd.
vs. Overseas Infrastructure
Alliance (India) Private Ltd.
(2021) 165 CLA 348 (SC)
Dispute in case of Financial
debt is immaterial so long
as the debt is due & payable
under the law Section 7 of
the IBC.
18 NOVEMBER 2023
Innovative Industries Ltd. vs.
ICICI Bank; (2017) 140 CLA
39 (SC)
2. Applicability of the Limitation
Act, 1963:
The Limitation Act provisions
for the revival of time
barred Debt that cannot be
made effective by just filing
petitions in 2016 or 2017
on the ground that the IBC
became effective from 1st
December 2016.
The Limitation Act
applicability would not
serve its object, if the
addition of Section 238A,
unless it is construed as
being retrospective and
clarificatory, else application
seeking to resurrect time -
barred claim would have to
be allowed.
B. K. Educational Services
(P) Ltd vs. Parag Gupta &
Associates
(2018) 146 CLA 380 (SC).
Article 137 of the Limitation
Act applies to the application
under Section 7 of the IBC &
not Article 62, and accordingly
a 3 years’ time period be
THE CHARTERED ACCOUNTANT
considered from the date of
default & not 12 years.
The Limitation Act applies
to applications filed under
Section 7 & 9 of the IBC.
Gaurav Hargovind Dave vs.
Assets Reconstruction Co.
(India) Ltd & another.
(2019)152 CLA 309 (SC)
Limitation, in no way, comes
in the way of filing the
application under Section 7
of the IBC, if the corporate
debtor acknowledges debt
in the past 3 years within
Limitation, as it results into a
fresh cause of action.
Deena Bank (now Bank Of
Baroda) vs. C. Shivkumar
Reddy & Another (2021) 165
CLA 365 (SC)
The Limitation Time can
only be extended in the
manner provided in the
Limitation Act 1963.
Jignesh Shah Vs. Union Of
India and Ors. (2019) 152
CLA 519 (SC)
The burden of prima facie
proving occurrence of the
default & the application
filed under Section 7 of
the IBC within the period
of Limitation is entirely on
the financial creditor. While
the decision to admit an
Application under Section 7
of the IBC is typically made
on the basis of the material
furnished by the financial
creditor, the Adjudicating
Authority is not barred from
examining the material
that is placed on record
by the corporate debtor
to determine that such
application is not beyond the
period of Limitation.
Limitation is a mandatory
ground for testing
the maintainability of
Application.
Rajendra Narottamdas Sheth
& Anr vs. Chandra Prakash
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THE CHARTERED ACCOUNTANT
Jain & Anr. (2021) 165 CLA
334 (SC)
All the above provide a few
glimpses of how the skeleton
of the IBC has been filled up
with the body mass & blood
circulation by the Higher
Judiciary.
As per the IBBI data as on 31st
March 2021, the NCLT approved
the Resolution Plan for 348
stressed assets under CIRP
which resulted in the resolution
of around Rs 2.03 lakh crore,
as against a total claim of the
financial creditor of Rs 5.16 lakh
crore with a recovery rate of 39
%; whereas, had these been
gone in liquidation could have
released a recovery rate of 22%.
The IBBI Report of 2023 further
reveals that the IBC has resulted
in a cumulative resolution of
678 cases till March 2023, and
the creditors have realised Rs
2.86 lakh crore under these
Resolution Plans. It has also
been pointed out that the
IBC has also resulted into a
settlement of 25107 applications
involving a value of an underlying
debt of Rs 8.81 lakh crore.
The IBBI report further reveals
that, as of June 2023, a closure
achieved in 4742 cases against
a total of 6815 cases was
initiated. 2622 cases out of
4742 cases were successfully
rescued, whereas 2120 cases
resulted in liquidation. The data
also speaks of 38 % of the
CIRP that resulted in the rescue
operations of resolution plan
which were earlier with BIFR OR
DEFUNCT CD. The IBBI data
from the Adjudicating Authority
also reveals that till May 2023,
25565 cases were closed before
Admission, which was 3.75 times
of the cases admitted by the
Adjudicating Authority. A study
conducted by the IBBI through
Management School further
reveals the impact evaluation
of the rescued company that
www.icai.org
the IBC framework has yielded
for the resolved firms increased
turnover, increased CAPEX,
three-fold increase in market
valuation from Rs 2 lakh crore
to Rs 6 lakh crore, apart from an
improvement in liquidity.
The Revolution emerging
owing to IBC, apart from the
above stated input, are being
enumerated herein below :
1. Creditable threat of change
of ownership has resulted
in a change of mind set of
the Corporate Debtors, be it
big or small. This emerged
even as a Zero Debt
Company or restructuring
loans. Reference of daily
newspaper of last one year.
2. Increased Transparency
and Accountability as IBC is
managed in quasi -judicial
function. The IBC is creditors
driven Resolution with an
involvement of judicial
process.
563
THEME
3. IBC is running on an
economic freedom cycle
by facilitating a smooth
& efficient exit, if CD
(Corporate Debtor) has
maintained integrity & clarity.
4. Maintaining Timeline as laid
down is a challenge. In an
Article on BLOCKCHAIN
– IBC BY Mr. Akaaant K M
-2023, it is pointed out that
the average time taken for
the process under IBC is
1.6 YEARS, while the Law
laid down requires 330
days including time spent
in Litigation . Although the
web literature points out
that historically, under the
civil law, it used to take 25
years, while at the time of
introduction of the IBC,
it was pointed out as 4.5
years or so. Time has come
to think of IA (Interlocutory
Application) moderation as
pendency reflect CIRP > 270
days are 64 %, Liquidation >
2 years is 55%.
NOVEMBER 2023 19
564
THEME
5. Recovery by FC 30.84%
against claim, as of March
2023, may be tilting Bankers
to opt for other modes of
recovery like SARFAESI.
The RBI itself believes that
the IBC is probably the best
mechanism for creditors
to recover their dues, and
said that the right way to
look at its effectiveness
would be to compare the
Resolution value to the
liquidation value & not the
total loans. The RBI further
points out in terms of The
Economic Times dateed
December 27 2022, that
the Trends & Progress of
Banking points out that the
Realisation Value through
IBC was close to 201%
of the Liquidation value
at the end of September
2022. The Measurement
base itself needs a relook.
The valuation of CD at the
CIRP stage itself deflates
marketability of the CD. So,
the Right mechanism is for
the FC to keep a track of
Corporate Debtor through
Institutional Mechanism of
reviewing the operational
& financial performance.
No CD becomes insolvent
in a month or year but like
a silent disease, it starts
signalling.
6. It is not in dispute that
the IBC has established
a structured framework
for resolving insolvency,
and also encourages
collaborations between
Financial Creditors,
Operational Creditors
& Corporate Debtors to
have mutually beneficial
resolutions.
7. IBC has taken the form of a
Game Changer, augmenting
the legal framework for
facilitating the resolution of
Distressed CD as well as
encouraging Innovation &
20 NOVEMBER 2023
Risk-taking. It is an open
secret that while enacting
the IBC, the Parliament
observed that the core AIM
of the IBC revolves around
fostering entrepreneurship
& nurturing Innovation. The
IBC is still a 6 year old child
& has undergone several
changes /amendments
due to not only a rapid
evolution introduced by
the Legislature, but also by
the extraordinary solutions
provided by the Judiciary.
A few citations, as above,
also reflect that the Judicial
Authorities understand
that sometimes, tailored
solutions are imperative
for each case under the
IBC, as a result all aligned
with the objective of the
IBC. Here, under the IBC,
all quasi- judicial form
have consistently followed
a fresh perspective with
the help of stakeholders
& their Counsels. Such
area includes commercial
wisdom of the Committee
of Creditors, helping
Successful Resolution
Applicants against hydra
popping of claims post
approval of Resolution
Plans in the form of clean
slate, concept of Reverse
CIRP in the case of Real
Estate Companies, wherever
promoters have agreed
to complete the projects
by infusing additional
funds & handover the
flats to homebuyers, even
ProjectWise CIRP, cross
border insolvency under
existing legal framework
concept of Group Insolvency
etc.
8. As a result of all the above,
India’s ranking in the latest
Business Environment
Ranking (BER) globally
has risen to 10th out of 17
Economies in the Asian
THE CHARTERED ACCOUNTANT
Region for the forecast
period of 2023-2027,
a significant jump from
the 14th position during
2018-2022. Further, as per
the latest Ease of Doing
Business Index 2020 of
the WORLD BANK, India
ranks 63rd out of a total of
190 countries with a Doing
Business Score Of 71.
9. While we all agree that the
IBC framework provides
two tier mechanism for
Regulatory architecture
– IBBI & IPA’s . IBBI is a
principal regulator while
IPA’s are frontline regulators,
predominantly entrusted to
set minimum standards of
behaviour expected from IPs
as well as their professional
development. The growth
of the IP Profession is
expected to be high with
cyclical fluctuations.
Hence, there is a need for
setting up of Standards
in the form of established
guidelines, norms,
principles, procedures &
best practices that will
help IP in discharging
their accomplished tasks,
projects, programmes, etc.
in a consistent, effective,
& efficient manner, with
uniformity as is currently
available to the CA
profession in the form of
Accounting Standards.
ICAI should take up this
assignment to emerge as a
LEADER in this field.

Author may be reached at
drakmishra1956@gmail.com and
eboard@icai.in
www.icai.org
 565

THE CHARTERED ACCOUNTANT

THEME

Augmenting Economic Governance

through Accountancy Excellence
CA. Manoj Fadnis
Past President ICAI and CAPA
The corporate governance framework is linked to ‘transparency’
either directly or by implications. The public demand for greater
‘transparency’ became shriller with every corporate fraud
around the globe. As the corporate frauds centred around the
financial statements containing material misstatements, without
audit qualifications, the accounting practices and the auditors’
independence naturally came under deeper scrutiny. For the
corporate structure to exist and grow it is imperative that the
users of the financial statements must have confidence and
trust in the financial performance and the financial position
being reported to them. The current market capitalization on the
NSE1 is Rs 30,899,396.78 crores or US $3.72 Trillion. With so
much at stake, the financial and increasingly, the non-financial
information contained in the financial statements need to be not
only timely and relevant but also meet the expectation of the
large universe of the users.

T
he legal and the regulatory
response followed the
corporate frauds. The
US introduced the Sarbanes
Oxley Act in 2002 to improve the
auditing and public disclosure in
response to several accounting
scandals in the early 2000s.
In UK the Financial Reporting
Council was established with
the objective of restoring trust in
audit and corporate governance.
In Australia, the Corporate Law
Economic Reform Program (Audit
Reform & Corporate Disclosure)
Act 2004 came into effect from
1st July 2004. Several regulatory
reforms took place in India which
culminated in The Companies
Act, 2013 being implemented with
effect from 1st April 2014.
One common thread amongst
all these reforms has been the
emphasis on transparency in
the financial statements and
adherence to the accepted
1
As on 23rd October 2023 -NSE website
2
Objectives, usefulness and limitations of general purpose financial reporting as per the Conceptual Framework of Financial Reporting
under Indian Accounting Standards (Ind AS) issued by the ICAI.
global accounting benchmarks.
With the exception of the US, the
major economies have accepted
the International Financial
Reporting Standards (IFRS)
as issued by the International
Accounting Standards Board
(IASB) as the basis for the
financial reporting.
The objective2 of the general
purpose financial reporting is
to provide financial information
about the reporting entity that is
useful to existing and potential
investors, lenders and other
creditors in making decisions
relating to providing resources
to the entity. Those decisions
involve decisions about (a)
buying, selling or holding
equity and debt instruments;
(b) providing or settling loans
and other forms of credit; or
(c) exercising rights to vote
on, or otherwise influence,
management’s actions that affect
the use of the entity’s economic
resources.
The neutrality of the financial
reporting between the existing
and the future stakeholders is
an important characteristic.
Given the quarterly reporting
by the listed enterprises,
the management is likely to
be in pressure to show the
performance on a quarter-to-
quarter basis. The concept
of continuous disclosures of
material events to the stock
exchanges only adds to this
pressure. However, the uniformity
and the consistency in selection
of the accounting policies
ensures that the management
discretion does not override
the long-term objectives and
succumb to the short-term
pressures.
The financial statements are
required to describe how
efficiently and effectively the

www.icai.org NOVEMBER 2023 21

566
THEME
entity’s management and
governing board have discharged
their responsibilities in using the
economic resources available
to the entity. The claims against
the entity is also an important
information sought for by the
stakeholders to evaluate the
performance and therefore,
requires to be properly reported.
The accounting frauds exploit
the grey areas in accounting.
It is imperative these areas
are minimised, and the
best accounting practices
are codified. Intangible
assets, contingent liabilities,
accounting of derivatives
are some of the examples
where the improvement in
accounting requirements, as
per the applicable accounting
standards, have resulted in
more accountability and better
governance. The disclosures of
related party transactions have
led to more questioning of the
management on these issues
and has attracted more attention
of the regulators.
The differences between the
intangible items and intangible
assets are now well settled.
While all intangible assets are
intangible items, the reverse
is not true. Recognising large
expenditure as deferred revenue
expenditure and amortising
it over a few years was a
common practice. In fact, the
Schedule VI to the Companies
Act, 1956 till 2011, permitted
the classification of the
miscellaneous expenditure to the
extent not written off or adjusted
under the heading of ‘Assets’
in the balance sheet. Thus, it
was an accepted position for
the corporates to write off large
revenue expenditure such as
advertisement etc.. over a period
of few years but at the same
time claim it is an expenditure
under section 37 of the Income
3
Order no WTM/AB/CFID/CFID_1/20686/2022-23 dated 21st October 2022
22 NOVEMBER 2023
Tax Act for the purpose of
computation of taxable income.
The revision of Schedule VI in
2011 and presently the Schedule
III to the Companies Act 2013
permit the Accounting Standards
to become the basis for the
preparation and presentation of
the financial statements. As a
result, the principles enunciated
in AS 26/Ind AS 38 will not
permit capitalization of revenue
expenditure and the subsequent
amortization over a period
of time but will require such
expenditure to be charged to the
statement of profit and loss.
The accounting standards are
principle based. The definitions
of terms may be more specific
under the law but will be broader
under the applicable accounting
standards. The terms used in the
law will apply for the all the legal
and regulatory purposes whereas
the definition of the same term
as per the accounting standard
will apply for the purpose of the
financial statements.
The term “key managerial
personnel” (KMP) is defined
in sub-section (51) of section
(2) of the Companies Act,
2013 (the Act) to mean (i) the
Chief Executive Officer or
the managing director or the
manager; (ii) the company
secretary; (iii) the whole-
time director; or (iv) the Chief
Financial Officer. The term
‘manager’ is defined under
sub-section (53) to mean an
individual who, subject to the
superintendence, control and
direction of the Board of
Directors, has the management
of the whole, or substantially
the whole, of the affairs of
a company, and includes
a director or any other person
occupying the position of a
manager, by whatever name
called, whether under a contract
of service or not.
THE CHARTERED ACCOUNTANT
As against this the Accounting
Standard 18 Related Parties
defines it as those persons
who have the authority and
responsibility for planning,
directing and controlling the
activities of the reporting
enterprise. Similarly, Ind
AS 24 defines it as those
persons having authority and
responsibility for planning,
directing and controlling the
activities of the entity, directly or
indirectly, including any director
(whether executive or otherwise)
of that entity.
The definition of the ‘manager’
under the Act is very wide. A
person may not fall within the
definition of the ‘manager’ but
may be covered as a KMP
under the applicable accounting
standards. Independent
Directors are not covered within
the definition of the KMP under
the Act and AS 18 whereas
they are not excluded as per
Ind AS 24. Interestingly Ind AS
24 includes ‘domestic partner’
within the definition of close
members of the family who are
expected to influence a related
party. Given the changing
social scenario, the importance
of such inclusions cannot be
underestimated.
The disclosures of the
transactions with the KMPs, their
relatives and entities privately
controlled by the KMPs adds
a lot of value to the financial
statements. The requirement
to disclose these transactions
results in higher responsibilities
on the audit committees while
approving and ensuring the same
to be at arm’s length.
The interpretations of the
Accounting Standards is gaining
more importance with the
regulators taking strict action.
SEBI3 barred a well reputed
listed company as well as
www.icai.org

THE CHARTERED ACCOUNTANT
its promoters from the stock
market for two years, for
fraudulent misrepresentation
of the company’s statements.
However, the order has been
stayed by the Securities
Appellate Tribunal (SAT). Thus,
the matter is sub-judice. The
issues involve interpretation of
the then applicable accounting
standards. The said company
had real estate revenue as a
significant constituent of the
total revenue. The real estate
business had entered into sale
agreements with an unlisted
company in which the employees
of the listed company were the
directors. It was alleged that
the said directors were under
the control of the management
of the listed company. Also,
another allegation was that the
shareholding pattern of the
unlisted company was such that
the majority was held by the
listed company and its promoters
indirectly. If so, the transactions
were between the related
parties and should have been
disclosed accordingly. Further,
sale arrangements with the
unlisted company were alleged
to be not genuine and the profits
from such transactions were
unreal. The early outcome of the
litigation will be useful.
With the growth in the corporate
sector, the corporate groups
have also increased manifold.
A group includes subsidiary,
associate and a joint venture.
An entity has control over
a subsidiary and therefore
line by line consolidation is
mandated. As against this, in
case of an associate the investor
has significant influence and
therefore, the equity method
of accounting is permitted. Ind
AS 110 lays down elaborate
principles for the consolidation
of a subsidiary. It defines
4
WTM/ASB/CFID-SEC4/25452/2022-23 dated 31st March 2023
5
IASB Chair Andreas Barckow at the IFRS Foundation Conference: Communicating
with investors in uncertain times.
www.icai.org
the principle of control and
establishes control as the basis
for consolidation. It also sets
out how to apply the principle
of control to identify whether an
investor controls an investee and
therefore must consolidate the
investee.
The issue whether an investee
should have been consolidated
as a subsidiary or as an
associate came before SEBI
recently. SEBI4 held that the
company had wrongly classified
a particular company as an
associate and not as a subsidiary
and accordingly the consolidated
financial statements were not
as per the provisions of Ind AS
110 resulting in the financial
statements not showing true and
fair view. This order is also under
appeal before the SAT and thus
the case is sub-judice.
The ultimate outcome of the
litigation may take time. But such
cases highlight that governance
practices are important in
selection of the accounting
policies and aggressive
interpretations need to be
avoided.
The Accounting Standards have
evolved over a period of time.
Today there are two sets of
accounting standards – the first
set is, the Accounting Standards
(AS) which are applicable to
smaller entities and the second
set is, the Indian Accounting
Standards (Ind AS) which are
applicable to the listed and
entities with net worth more than
rupees two hundred and fifty
crores. Banks and insurance
companies are still to migrate to
Ind AS.
The Ind AS are converged with
the IFRS, have greater emphasis
of economic substance over legal
form, recognise time value of
567
THEME
money and have greater usage of
fair value. It is said that fair value
is relevant while the historical
cost is reliable. The trade-off
is thus, between reliability and
relevance. In case of financial
assets and liabilities, the fair
value basis of measurement
is more relevant than the age-
old historical cost concept.
Derivatives require minimum
initial investment but the outcome
on their settlement can be far
greater. Measuring the derivatives
at historical cost will be irrelevant.
They have to be measured at
fair value. Keeping pace with the
changing business complexities,
the Indian Accounting Standards
are more in line with the needs of
the present times.
The financial reporting too has
its limitations. They are not
designed to show the value of a
reporting entity; but they provide
information to help existing and
potential investors, lenders and
other creditors to estimate the
value of the reporting entity.
It is acknowledged that the
use of accounting estimates
is a limitation of the financial
statements, but this does not
make the financial statements
less reliable.
Markets5 rely on trust. Investors
need to trust the markets, to
trust the companies. And trust,
in turn depends on all players
communicating transparent
and useful information. This is
particularly true and important in
times of heightened uncertainty.
Good governance and good
accounting will always go hand
in hand. Corporates following the
accounting principles in letter
and spirit will be richly rewarded
by the market and those who do
not, need rightly to be punished.

Author may be reached at
eboard@icai.in
NOVEMBER 2023 23
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 569

THE CHARTERED ACCOUNTANT

THEME

GST: Simplifying Taxes and

Amplifying Progress
CA. Sushil Kumar Goyal
Member of the Institute
GST: Simplifying Taxes, Amplifying Progress is a phrase
that underscores the goals and benefits associated with the
Goods and Services Tax (GST) system, which has been
successfully implemented in India. Government of India
ushered the biggest-ever tax reform by converging more than
two dozen indirect taxes into the Goods and Services Tax
(GST). The task was daunting as the country was beset with
multiple legacy taxes, some of which were imposed by the
Central and some were imposed by the States legislations
and their compliances by the taxpayers made running a
business was difficult.

T
he introduction of GST was
intended to create a more
efficient and transparent tax
system, reduce tax evasion, and
promote economic development
which has been successfully
done in our country with the
participation of the Central and
State authorities. It is a positive
step towards modernising and
rationalising the tax.
GST Council is the constitu-
tional body that makes
recommendations to the Union
and States on various aspects
related to GST like tax rates,
exemptions, procedures etc.
which includes representatives
from both the Central and State
Governments. The GST Council
continues to meet regularly to
address challenges and make
necessary reforms. Discussions
are being taken place on a regular
basis about further simplification
of tax rates and a possible single
tax rate for some items.
Simplifying Taxes
Key benefits brought about
by GST in India
One Nation, One Market, One
Tax: GST unified the tax system
by creating a single tax that
applies uniformly across the
country. Under the previous tax
regime, on number of occasions
taxes were calculated and
levied on other taxes, creating
a cascading effect. It eliminated
the cascading effect of taxes
making the tax system more
transparent and efficient.
Uniform Procedures: Uniform
tax laws and procedures have
been adopted by both Central
and State Governments with
a facility of single compliance
mechanism, simplifying the entire
taxation process. This simplifies
the entire taxation process and
ensures consistent application of
tax laws across the country.
Input Tax Credit (ITC):
Businesses can claim input tax
credit, which allows them to set
off the GST paid on purchases
against the GST collected
on sales. This encourages
transparency and reduces the
overall tax liability for businesses.
This further reduces the
working capital requirements
and facilitates the expansion
of production capacity or the
launch of new product lines.
For example, if a manufacturer
purchases raw materials and
pays GST on them, they can
claim an ITC when selling their
finished products, resulting in
lower taxes.
Simplified Rate Structure:
GST has a tiered rate structure
with four primary tax rates (5%,
12%, 18%, and 28%) apart
from Nil rate, making it easier
for businesses and consumers
to understand and comply with.
The uniform tax rates for similar
goods and services across India
simplify pricing and taxation.
For Example, under the previous
tax regime, a manufacturer would
pay various taxes such as excise
duty, VAT, entry tax and central
sales tax on the production and
sale of goods. With GST, these
are replaced by a single tax,
making it easier to calculate and
remit taxes.

www.icai.org NOVEMBER 2023 25

570
THEME
The simplified tax
structure encourages
businesses to operate
within the formal
economy.
Streamlined Supply Chain:
Uniform tax system across the
country and introduction of single
e-way bill system with removal
of check posts under GST has
made it easier for businesses
to move goods across State
borders. This streamlined
supply chain has led to reduced
transportation time and costs,
ultimately benefiting businesses
with effective logistics and
distribution industries. It has also
eliminated the need for multiple
State-specific permits. This
has led to faster and cheaper
transportation.
For instance, a logistics company
can now make deliveries across
States without encountering
multiple check posts, saving time
and fuel costs resulting in more
competitive shipping rates and
better services.
Simplified Compliance: GST
introduced a common online
platform known as GST Portal
through a single agency named
Goods and Services Tax Network
(GSTN) for tax compliance and
filing. This reduced the need for
businesses to deal with multiple
tax compliances with different
tax authorities and a lot of
paperwork. Now, all GST-related
tasks like registration, filing of
returns, and payment of taxes
can be completed online with the
help of GSTN. As tax compliance
improves, Government revenues
increase, enabling more public
spending on infrastructure and
social welfare programs.
Reduction in Tax Evasion: The
GST system is technology-driven
and has reduced the scope for
26 NOVEMBER 2023
tax evasion up to a great extent.
Recording of transactions on
the GSTN portal allows easy
tracking of the same, making it
harder for tax evaders to hide
or misreport their transactions.
The digital trail created by GSTN
and the integration of business
processes with Government
systems make it difficult to evade
taxes. GST’s implementation has
led to a notable increase in tax
compliance. According to the
study and Government’s data,
GST has brought more business
transactions into the formal tax
net, which can be witnessed by
the increase in the number of
registered taxpayers resulting in
huge reduction in tax evasions.
For example, a tax evader that
used to misreport its sales to
avoid paying correct taxes,
is now monitored through
electronic invoices and e-way
bills, is less likely to engage in
tax evasion.
Digitalization of tax collection
and compliance process:
GST through GSTN has made
it mandatory for businesses
to register and file returns
online, reducing paperwork
and manual errors. This has
made the registration process
more efficient. Businesses are
required to pay their GST liabilities
electronically through various
modes such as NEFT, RTGS,
and other modes. This promotes
digital transactions and minimises
the use of cash. E-invoicing
mandates businesses above
certain turnover to generate
Invoice Registration Number
(IRN) for invoices and exchange
them electronically. This helps
in reducing the scope for fake
invoices and streamlines the
reconciliation process for both
businesses and tax authorities.
Tax authorities use data
analytics to identify potential
tax evaders and discrepancies
in tax returns. Automation helps
THE CHARTERED ACCOUNTANT
in real-time data matching and
fraud detection, making the
tax collection process more
efficient and fair. Digitalisation
has reduced the need for human
intervention in routine tasks such
as data entry and document
verification. This not only saves
time but also minimises errors.
The digitalisation of GST has
improved transparency in tax
collection and compliance.
Businesses can track their GST
transactions, and tax authorities
can monitor compliance more
effectively.
Benefits for Economy
Boost to Organised Sector:
The simplified tax structure
encourages businesses to
operate within the formal
economy. This shift from the
informal to the formal sector not
only increases tax collections
but also ensures better labour
protection and social security for
workers.
For example, the construction
sector, which was largely
informal, is now gradually
formalising due to the need for
GST compliance.
Reduction in Black Money:
With increased transparency and
tax compliance, the use of black
money (untaxed income) in the
economy has been curtailed,
reducing the shadow economy.
Increase in Foreign
Investments: The introduction
of GST has made India’s tax
system more attractive to
foreign investors. A simplified
tax structure and improved ease
of doing business is boosting
foreign direct investment (FDI)
and stimulating economic
growth. Foreign Direct
Investment (FDI) trends have
shown positive growth, with
foreign investors taking interest
in various sectors, including
manufacturing, infrastructure and
technology.
www.icai.org

THE CHARTERED ACCOUNTANT
Price Stability: GST has
helped reduce price variations
across regions. The removal of
cascading taxes and a uniform
tax rate on goods and services
contribute to price stability,
which benefits consumers.
For instance, a consumer buying
a smartphone will pay the same
GST rate regardless of the State
they are in. Price variations
across States have reduced
significantly for various products,
making it easier for businesses to
set consistent prices across the
country.
Market Expansion: The
establishment of a single national
market has enabled businesses
to reach a broader customer
base across State boundaries,
leading to market expansion and
increased economic activity. The
economic integration brought by
GST has enhanced economic
cooperation among States and
Regions.
Example: A textile manufacturer
in Uttar Pradesh can now easily
sell its products to customers in
other States without bothering
about different tax rates and
entry tax facing the hassle of
inter-State trade. This opens new
markets and opportunities for
expansion.
E-commerce Growth: The
introduction of GST has
provided a level playing field
for e-commerce platforms and
traditional retailers. E-commerce
businesses now collect and remit
GST, just like physical stores.
This fair competition benefits
consumers and fosters the
growth of e-commerce in India.
According to industry reports,
e-commerce platforms have
reported increased sales and a
broader consumer base due to a
more transparent and easier tax
compliance system.
Favorable for Start-ups: GST
provides uniform, clear and
www.icai.org
specific tax structure across the
boundaries of States for start-
ups and eases the process of
registering and filing tax returns.
Reports suggest that the uniform
and simplified tax structure
and ease of registration under
GST have been advantageous
for start-ups. The number of
start-ups in India has been on
the rise, with many benefiting
from reduced tax compliance
complexities. They no longer
have to worry about the different
tax compliances and structures.
Better Record-Keeping: The
digitisation of invoices and other
records under GST has led to
better financial record-keeping
practices among businesses,
improving financial transparency
and accountability.
For Example, a medium-sized
retailer can maintain its sales and
purchase records electronically,
which not only simplifies
compliance but also provides
better insights into business
operations, allowing for more
informed decisions and growth
strategies. Even free of cost
software are made available by the
Government through GSTN to the
small and medium sized retailers.
These indirect benefits of GST
collectively contribute to a
more transparent, efficient, and
growth-oriented economy.
Benefits for export sector
Goods and Services Tax (GST)
has indeed played a role in
facilitating and increasing
exports in India. Several factors
and provisions within the GST
framework have contributed to
the growth of exports:
Zero Rating of Exports: Under
the GST system, exports are
treated as a “zero-rated supply.”
This means that the GST rate on
the export of goods and services
is set at 0%, effectively exempting
them from GST. This zero-rating
ensures that no tax is payable on
571
THEME
The introduction
of GST has made
India's tax system more
attractive to foreign
investors.
the export of goods or services,
making Indian products and
services more competitive in
international markets.
Refund of ITC: Exporters can
claim refunds on the GST paid on
inputs, input services, and capital
goods used in the production
and export of goods or services
even on the goods or services
which are not taxable under
GST. This provision ensures
that businesses do not face a
financial burden due to GST,
making it easier for them to price
their products competitively in
global markets.
Simplified Compliance: The
GST framework simplifies
compliance requirements for
exporters. All GST-related
processes, including registration,
filing, and claiming refunds, can
be completed online through the
GSTN portal. The digital nature
of GST compliance and record-
keeping adds transparency and
accountability to export-related
transactions. This transparency
can be attractive to international
buyers who seek reliable and
traceable supply chains.
Enhanced Export
Competitiveness: With zero-
rated exports, refund of input
tax credit, and simplified
compliance, Indian exporters can
offer more competitive prices for
their products and services in the
global market. This enhanced
competitiveness has led to
increased demand for Indian
exports.
In summary, GST in India has
played a crucial role in increasing
NOVEMBER 2023 27
572
THEME
exports by making Indian
products and services more
competitive in the international
market. The growth in exports
is essential for the Indian
economy, as it generates foreign
exchange, provides employment,
and contributes to economic
development.
Amplifying Progress
Growing Taxpayers - GST
represents a people-centric
reform, with taxpayers and
consumers at its core. Various
administrative and policy
measures have led to improved
compliance among taxpayers.
The success of this effort
is evident in the significant
increase in the total number of
registered taxpayers within a
short six-year period since the
introduction of GST in 2017. The
continuous rise in the number of
new taxpayers over the past six
years serves as strong evidence
of the advantages that GST
offers to registered entities.
The Economic Survey 2023,
tabled before the Parliament by
the Hon’ble Financial Minister
Nirmala Sitaraman reviews
the performance of the Indian
economy and lays the road
ahead for the next fiscal year.
In the survey, it was observed
that the Goods and Services Tax
(GST) taxpayers have increased
in number from 70 lakh in 2017
to 140 lakh in June 2023.
Growing GST- Revenue - The
gross GST revenue collected in
the month of September, 2023
is ₹1,62,712 crore out of which
CGST is ₹29,818 crore, SGST is
₹37,657 crore, IGST is ₹83,623
crore (including ₹41,145 crore
collected on import of goods)
and cess is ₹11,613 crore
(including ₹881 crore collected
on import of goods).
The revenues for the month of
September 2023 are 10% higher
than the GST revenues in the
same month last year. During
28 NOVEMBER 2023
the month, the revenues from
domestic transactions (including
import of services) are 14%
higher than the revenues from
these sources during the same
month last year. It is for the
fourth time that the gross GST
collection has crossed ₹1.60 lakh
crore mark in FY 2023-24.
The GST revenue collection
has been increasing and in the
current year it has shown a rising
graph by approximately 12% as
compared to last year.
GST Returns trend - The GST
law had prescribed returns and
forms and broadly every taxpayer
is required to upload their ‘sales
statement’ in Form GSTR-1
based on which a monthly return
in Form GSTR-3B is also required
to be filed containing details
of outward supplies, details of
Input Tax Credit (ITC) availed
on the input supplies and the
tax payments. To enhance the
taxpayers experience in return
filing various technological and
procedural initiatives have been
taken during the last six years.
Return filing percentage for both
GSTR-1 and GSTR-3B is now
more than 90% which earlier
used to be much less. It may also
be seen that a good number of
taxpayers are filing their returns
even after the last date of filing.
93.2% of statement of invoices (in
GSTR-1) and 91.4% of returns (in
GSTR-3B) of February were filed
till March 2023 as compared to
83.1% and 84.7%, respectively
same month last year.
Growing E- Invoices -
E-Invoicing is a rapidly
expanding technology which
helps taxpayers in backward
integration and automation of tax
related processes. It also helps
tax authorities in combating
the menace of tax evasion.
This helps in seamless flow of
credit and invoice matching as
envisaged in the GST regime.
Further, it helps in real-time
THE CHARTERED ACCOUNTANT
updation of data on the GSTN
system and thereby, drastically
reducing the time taken in filing
the returns. The number of
e-Invoices generated per month
has progressively increased from
595 lakh in October, 2020 to an
all-time high of 1260 lakh in April,
2022. Around 42 lakh e-Invoices
were generated per day on the
portal in the month of April, 2022.
Increasing E-way Bill - With a
view to remove trade barriers
from the State borders and
making India one Market, e-Way
bill system was introduced for
the inter-State movement from
1st April, 2018 for the entire
country and from 16th June,
2018 for intra-State movement in
a staggered manner in different
States. The introduction of
e-Way (electronic way) bill is a
monumental shift from the earlier
“Departmental Policing Model”
to a “Self-Declaration Model”.
Subsequent to introduction of
e-Way bill system, border check-
posts have been removed by
various State authorities that
has provided a common market
and hassle-free movement of
goods throughout the country,
thus realising the goal of “One
Nation, One Market”. It has been
reported that resultantly, average
distance travelled by a vehicle/
truck, per day, has considerably
increased. In August 2023, there
was a record-breaking number of
9.34 crore e-way bills generated,
as per data from GSTN, the IT
system for indirect taxes. This
surpassed the previous high of
9.09 crore e-way bills in March of
the same year.
Economic Growth - India added
a total of 120,966 companies
and LLPs between April and
September 2023, marking
an 11.4% increase from the
previous year when the figure
stood at 108,583, according to
data from the Government.
www.icai.org

THE CHARTERED ACCOUNTANT
ICAI conducts
capacity building
programmes on GST
for officers of Central
tax, State tax, PSUs
and other Government
departments.
The surge in company
incorporation aligns with multiple
indicators of strong economic
growth, including healthy goods
and services tax collections,
high PMI for both services and
manufacturing, and increased
credit demand. The services
Purchasing Manager’s Index
(PMI) reached a 13-year high
in September 2023, while the
manufacturing PMI, though
experiencing a recent dip,
remained well above historical
averages.
According to the Reserve Bank
of India’s consumer sentiment
survey released on October
6, 2023, expectations for the
general economic outlook,
employment, income, and
spending are set to improve over
the next year, with the future
expectations index reaching a
four-year high.
Furthermore, the International
Monetary Fund (IMF) predicts
that India will remain the world’s
fastest-growing large economy
in the current fiscal year and
the next, with expected growth
rates of 6.1% and 6.3%,
respectively—more than double
the global average.
ICAI: Knowledge Partner in
GST Journey
The Institute of Chartered
Accountants of India (ICAI)
plays a significant role in the
implementation and operation
of GST system in India.
The members of Institute of
Chartered Accountants of India
www.icai.org
(ICAI) i.e., Chartered Accountants
help businesses and individuals
comply with the GST regime
and leverage its benefits while
adhering to ethical and legal
standards. They help clients
understand and navigate the
complexities of GST laws and
thus, act as a catalyst in smooth
implementation of GST law.
Further, the ICAI through its
GST & Indirect Taxes Committee
contributes in various ways to
the GST regime:
Education and Training: ICAI
provides education, training,
and professional development
for its members to ensure they
are well-versed in GST laws,
regulations, and procedures. This
includes offering specialized GST
certification courses to ensure
that Chartered Accountants
have the necessary skills and
knowledge to handle GST
matters effectively.
Advisory Services: Chartered
Accountants from ICAI provide
advisory services to businesses
and individuals on GST
compliance, tax planning, and
related matters. They help clients
understand and navigate the
complexities of GST laws.
Representation and Advocacy:
ICAI represents the interests of
its members and the business
community to Government
bodies, including the GST
Council. They provide feedback
and suggestions to the
Government regarding GST laws
and procedures. ICAI actively
supports the Government
in GST policy making and
implementation.
Capacity building for
Government: ICAI conducts
capacity building programmes
on GST for officers of Central
tax, State tax, PSUs and other
Government departments. The
training programmes focus on
strengthening the skills and
abilities of the officers.
573
THEME
Research and Publications:
ICAI conducts research on
GST-related topics and develops
publications and guidance
materials to help businesses
and professionals better
understand and comply with GST
regulations.
Seminars and Workshops: ICAI
organizes seminars, workshops,
and training programs related
to GST for its members and the
business community. These events
serve as platforms for knowledge
sharing and capacity building.
Ethical and Professional
Standards: ICAI emphasizes
the importance of ethical
and professional standards
among Chartered Accountants,
especially in the context of GST
compliance and taxation.
Hon’ble Primer Minister of
India, Shri Narendra Modi,
has acknowledged the ICAI’s
contribution in GST Knowledge
dissemination in his letter to the
President, ICAI on the CA Day in
2018.
Conclusion
In conclusion, GST has emerged
as a transformative force in the
world of taxation, simplifying
the complex tax landscape and
amplifying progress for both
Governments and businesses.
With its implementation, India
has transitioned to a more
unified, transparent, and efficient
indirect tax regime, which in turn
has facilitated economic growth
and development. As India
continues to refine and adapt
its GST law and procedures, the
potential for long-term economic
growth and stability remains
promising, demonstrating that
good taxation can indeed be a
catalyst for national development
and prosperity. 
Author may be reached at
skgoyal@icai.org and
eboard@icai.in
NOVEMBER 2023 29
574

THEME THE CHARTERED ACCOUNTANT

Charting Pathways to Prosperity:

Financial & Tax Literacy for Inclusive
Development

life-altering. Catering to this

predicament, the Institute of
Chartered Accountants of
India (ICAI) has initiated a
drive, through its Group for
Promoting Financial & Tax
Literacy, that solely focuses
on disseminating essential
CA. Abhay Kumar CA. Umesh Ramnarayan
knowledge regarding
Chhajed Sharma
Member of the Institute Member of the Institute financial and tax literacy and
caters towards ICAI’s maxim
of being a true ‘Partner in
When trying to grasp the nuance of Financial and Tax Literacy, it is Nation-Building’. The Group
vital to understand that it all depends upon the ability of a person has established a website
to comprehend the concepts of Financial and Tax Literacy. With portal that effectively
proper guidance and knowledge, one can quickly hone those provides informative content
abilities to decipher the correct stance of financial literacy to make in 12 vernacular languages
viable financial decisions. Now, the question arises as to where to for ease of access to every
gain access to this pivotal information that has the potency to be citizen.

B
eing an academic
marvel, the present
education system of
the country is underway to
integrate financial literacy as a
vital subject in the curriculum.
To cater to the same purpose,
CBSE has included financial
literacy in its list of 33 added
subjects in the revised school
curriculums of India. But what
about those who have already
graduated from school? Better
yet, what about those people
who don’t even have access to
basic education? To propagate
financial literacy amongst those
people, benevolent thought
leaders and perspective-building
organizations must collaborate
to emphasize the importance
of imparting financial and tax
literacy. This monumental feat can
only be achieved if all of us do our
bit each day to teach someone
unaware of the vitality of financial
literacy.
Now that the urgency of
deliberating financial and tax
literacy has been established,
it is crucial to decipher what
financial literacy means.
Financial and Tax Literacy is
the development of a cognitive
understanding of financial
components to master the skills
of personal wealth management
with tools such as budgeting,
investing, taxation, etc.
Considering that the concepts
of budgeting, investing, and
taxation are slightly advanced
for laymen, it is pertinent to
start disseminating financial
knowledge right from the basics.
Savings and spending, bank
loans and Government schemes,
and digital payments are good
places to start with. These
concepts are used in the daily
routine of a citizen.

30 NOVEMBER 2023 www.icai.org


THE CHARTERED ACCOUNTANT
Financial Literacy
equips its pursuant
to prepare a customized
plan for retirement and
succession planning.
Amid the plethora of reasons
backing the vitality of financial
and tax literacy are the many
benefits that it concurs. Financial
and tax literacy streamlines
steadfast growth for the
individual as well as the economy
at large.
It commences with individual
financial management. Financial
and tax literacy emboldens
individuals to approach financial
matters in a responsible and
efficient manner. By imparting
pertinent fiscal knowledge,
financial and tax literacy enables
individuals to devise customized
solutions to their everyday
essentials in terms of managing
their finances.
Financial foresight counts as
one of the key advantages
that come with Financial & Tax
Literacy. It empowers individuals
for unforeseen circumstances
that may potentially hamper their
fiscal health. It equips folks to
efficiently handle uncertainties
such as unexpected illness,
accidents, natural disasters,
emergencies, unemployment,
etc. It may act as an aid to buffer
savings/assets to be utilized
during the need of the hour
or provide access to befitting
sources of insurance in order to
reduce financial risks.
Financial and tax literacy aids
one’s financial forethought along
the way. It can help individuals
decipher their short-term and
long-term fiscal needs and
plan their future course of
action in accordance with their
personalized requirements.
www.icai.org
With this pivotal knowledge, a
person can comprehend the
opportunity costs involved with
varied financial alternatives and
pick the right options befitting
their needs. Alongside this, it
facilitates the opportunity to
explore financial markets, and
investment ventures, and reap
tax benefits.
Financial & Tax Literacy amplifies
financial longevity, enabling them
to withstand any circumstances
that may arise. Fortifying the
inclusive stance of the financial
aspects inadvertently leads to
financial durability or financial
stability. Deploying financial
attributions adequately would
emplace a stable financial
system that incurs the potential
to withstand excessive debt,
and sustain sufficient liquidity/
solvency ratios, while complying
with prudential regulations. It
may also aid in foretelling any
potential financial crises and
establishing ways to combat
them.
The benefits don’t only restrict
to an individual’s development,
but they also leave a lasting
impact on the economy as well,
spearheading it to an economic
upswing. Akin to a ripple effect,
the amalgamation of financially
literate individuals transmutes
into financially responsible
citizens amassing to escalate
the financial equilibrium of
the nation. Each individual
contribution spearheads the
nation’s economy to become
financially forward. As the
financial aspects are dealt with
in a liable fashion, it leads to
an uprising economic upturn.
Continual investment of financial
assets in the right opportunities
abets the country’s economic
standpoint significantly.
One of the most plausible
advantages of financial literacy
is that it prepares you for a
575
THEME
financially secure future. Financial
Literacy equips its pursuant
to prepare a customized plan
for retirement and succession
planning. In order to grow one’s
finances gradually, investment
in mutual funds, systematic
investment plans, fixed deposits,
and interim deposits are some
of the most favourable options.
This accumulated wealth can
aid one’s retirement life and
henceforth succession planning.
Once a stronghold is established
on the basic concepts, one
can take the next step toward
financial integration. This concept
is a sporadic venture with the
potency to materialize upon
attaining an ample understanding
of essential financial ideations.
It refers to the phenomenon
wherein the financial markets
of neighbouring, regional,
and/or global economies are
closely linked. A few good
instances of this notion would
be cross-border capital flows
and domestic financial markets.
However, it is stringently
advisable to educate oneself
thoroughly before speculating
to venture into an investment in
these fiscal opportunities.
When we talk about financial
and tax literacy, usually, financial
literacy basks in the limelight,
leaving tax literacy lurking in
the shadows. However, tax
literacy is equally as important,
if not more. If a layman is asked
Financial and Tax
Literacy not only
educates the populace
about essential life-
saving knowledge
but also caters to
strengthening the
financial ecosystem
of the country.
NOVEMBER 2023 31
576
THEME
Financial
Inclusion refers
to ascertaining that
every individual and/
or business entity can
avail access to affordable
and fundamental
financial services, for
instance, banking,
insurance, savings,
and credit, regardless
of their income, or
orientation.
about the underlying concepts
of taxation and policies set
up by the Government, only a
handful would be able to answer.
This depicts the urgent need to
disseminate proper knowledge
about both financial as well as
tax literacy. Providing information
in an easily digestible format is
of utmost importance as that is
the only way to make the laymen
understand these advanced
concepts.
Financial and Tax Literacy not
only educates the populace
about essential life-saving
knowledge but also caters to
strengthening the financial
ecosystem of the country.
Even the Reserve Bank of
India (RBI), in the year 2020,
launched the 5Cs program. The
5Cs program encompasses
“Content, Capacity,
Community, Communication
and Collaboration” to promote
financial education under the
National Strategy on Financial
Education initiative. However,
conducive results are yet to be
achieved concerning educating
the populace about the impact
that financial and tax literacy can
have on their lives.
What was considered a heaping
challenge erstwhile, is now
32 NOVEMBER 2023
helming towards solution-
oriented problem solving. This
makes it evident that bolstering
dexterous financial prosperity
in students’ lives from the
get-go prepares them for a
financially sound future. This
in turn demonstrates that our
country beholds the prowess to
financially literate its masses.
Further prolonging the hope that
the disparity amongst inclusive
financial development for all
genders would one day come
to a halt. As a nation, we need
to recognize the potential of
financial inclusion for altering
the current fiscal standpoint
into an ever-evolving economic
landscape. The stepping stone
to emplace this stance would
be to educate and aware every
individual with the ability to
manage their fiscal affairs
adeptly.
Even in the 21st Century, fiscal
disparity is a persisting harsh
reality, especially in developing
nations. It is oddly ironic that
most of the homemakers, who
have the potential to make the
most out of financial operations,
are frequently deprived of this
transformative knowledge. Every
family functions differently,
hence, tailor-made financial
solutions need to be adopted.
With pervasive knowledge,
financial road-mapping becomes
an effortless task for a financially
literate homemaker.
Financial Inclusion refers to
ascertaining that every individual
and/or business entity can
avail access to affordable and
fundamental financial services,
for instance, banking, insurance,
savings, and credit, regardless of
their income, or orientation. With
the objective to foster economic
stability, decrease poverty, and
accredit the marginalized strata
of the population by allocating
essential tools to manage their
THE CHARTERED ACCOUNTANT
finances and partake in the
economic upswing.
Unfortunately, ample challenges
continually persist hampering
the promotion of global financial
inclusion. Approximately 24%
of the worldwide population
lacks access to rudimentary
financial tools such as accounts,
insurance, savings, etc. And
from the ones that do, only 29%
deposit their savings in financial
establishments. This problem
escalates even further for women
due to restrictive social norms,
and lack of financial literacy,
immensely increasing the gender
gap in facilitating financial tools.
In terms of business entities,
even if we consider MSMEs,
things only get dire. Small-scale
and large-scale enterprises in
developing countries are beset
increasing barriers to financial aid
by up to 30%.
The National Centre for Financial
Education’s (NCFE) Financial
Literacy and Inclusion Survey
held in 2019 concludes that the
overall financial literacy level of
the country measures up to only
27%. However, according to a
statement made by the Reserve
Bank of India (RBI) during the
last month, the value stated in
the Financial Inclusion Index (FI
Index) for March 2023 amounts
to 60.1 as opposed to 56.4
during the same time last year. It
was indisputably acclaimed that
even without any ‘base year’, the
FI Index reflects the concerted
efforts of all stakeholders toward
bestowing financial inclusion.
With the objective of minimizing
the financial pitfalls upraised
by financial illiteracy and
contributing to the Government’s
initiatives catering to educating
the populace, the ICAI continually
initiates innovative exertions.
Since its initiation, the Group
for Promoting Financial & Tax
Literacy has earnestly worked
www.icai.org

THE CHARTERED ACCOUNTANT
towards the efficient propagation
of financial and tax literacy. The
Group has tapped a significant
number of mediums to attain
this purpose. A radio campaign
disseminating knowledge with
coverage of content pertaining
to financial and tax literacy
in English, Hindi, and various
other vernacular languages to
reach a wider stratum of masses
has been originated by the
Group. This effort has been well
appreciated by one and all. The
Group continues to strive and aid
in ICAI’s attempts to ascend as a
true “Partner in nation-building”.
Pondering over the solutions to
overcome the aforementioned
challenges, a plethora of
innovative initiatives are required
to be implemented by the
Government, the ICAI and
citizens alike. A 3-point strategy
can be enacted to forge a
sturdy path leading to financial
inclusion.
The first step would be to
substantiate the financial
ecosystem. The best way to
accomplish this is by nurturing
Public-Private-Partnerships
(PPP), by inculcating financial
literacy with the incorporation
of capacity-building programs.
It can further be reinforced
with providing gender-inclusive
financial services.
The second step inculcates
diversifying financial services.
Beginning with extending
insurance penetration further 7%
of GDP. To the accumulation of
agriculture, rural, and migrant
sections of the society in the
financial inclusion spectrum.
And decreasing the cost of
capital issued to financial
institutions. To further introduce
inventive distribution channels
to homogenize cross-border
payments.
www.icai.org
The third step would be
a rigorous emphasis on
consumer protection. It can
be achieved by emplacing a
systematic arrangement to
cater to consumer protection.
Implementing the said system
efficiently and innovating it
in due course of time would
further invigorate the successful
implementation of this crucial
step. It can further be vitalized
by strengthening the consumer’s
trust in digital financial services.
To deploy this strategy into
action, the Government of India
continues to develop and put
forth innovative programs to
incentivize economic security
and literacy for women. An
extraordinary example of these
initiatives is the Pradhan Mantri
Jan Dhan Yojana (PMJDY). This
program signifies an exceptional
step taken by the Government
to advance the level of financial
inclusion in the country.
There is a dire need to instigate
customized financial literacy
programs that cater to people
residing in Tier 2 and Tier 3
regions. The people in these
regions face unique challenges
that need to be addressed in
accordance with tailor-made
solutions for each individual.
Alongside this, providing
essential financial services
for people bechances the
heightened probability of
increasing financial literacy.
Persisting in the crumpled
edges of a sporadically thriving
economy are many of the
marginalized sections of society
who are in as much need of
financial literacy as any other
citizen. Joining forces with local
Non-Governmental Organizations
(NGOs) establishing self-help
groups, community-based
organizations, and holding
workshops, can be a pivotal step
in the right direction. It not only
577
THEME
stimulates financial literacy in
their lives but also provides them
with a sense of community and
belonging.
To reinforce the notion of
community and belonging, ICAI’s
Group for Promoting Financial
and Tax Literacy has time and
again brought the CA community
together to join forces and
collaborate to direct the pathway
to raise financial awareness.
Last year, the Group instated
the Sone ki Chidiya initiative,
conjoining all the CAs to take an
oath to raise financial awareness
amongst the varied strata of
society. Vittiyagyan Sankalp, the
honorary successor of the Sone
ki Chidiya initiative accumulated
the participating CA members
and students to assemble a
cohort of accomplished CAs and
utilize their knowledge effectively
to impart essential knowledge.
The ICAI constantly strives
to contribute to the financial
furtherance of the nation with
consistent tenacious maneuvers
with a resolution to serve the
financial fortitude of the nation.
The goal must be to make
people realize how to make
their buck work for them to
expand their wealth rather than
having it sit idle in the corners of
lockers installed in their homes.
This, in turn, will transpire
savings enough to plan a sound
retirement or succession plan.
It is crucial to realize that saving
and investing can start at any
age. There’s no perfect time to
start learning how to invest your
money and expand your wealth.
So, it’s never too late to learn.
Your financially adept future
awaits you.

Authors may be reached at
abhay.chhajed@icai.in,
fcaumeshsharma@gmail.com and
eboard@icai.in
NOVEMBER 2023 33
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 579

THE CHARTERED ACCOUNTANT

THEME

Developing New Age Professional

Accountants

CA. Vandana D. Nagpal CA. Priya Subramanian CA. Shefali Jain

Member of the Institute Member of the Institute Member of the Institute

Professional accountants are the backbone of the economy and they play a critical role in helping
businesses adapt to new tax regimes and new improved financial reporting and audit framework.
In the rapidly evolving economic landscape, the role of a professional accountant has undergone a
transformation and there has been a marked shift towards strategic decision making and entrepreneurial
roles. Driven by globalisation, growing business complexities and significant developments in information
and technology, a chartered accountant is expected to assume diverse responsibilities in a dynamic
environment. Newer avenues like Forensic Accounting, Sustainability Reporting, Risk Management,
Forex and Treasury Management, Valuation, etc. have opened up for chartered accountants. In view
of the varied expectations from aspiring chartered accountants, a need was felt to devise a whole new
approach for developing, updating and delivering chartered accountancy education and training.
Accordingly, the ICAI has formulated the New Scheme of Education and Training, which has come
into force from 1.7.2023.

T
he New Scheme of
Education and Training of
ICAI aims to build “global
ready” professional accountants
by equipping aspiring chartered
accountants with the requisite
competencies through –
● enriched learning
methodologies,
● cogent and holistic skill
assessment,
● effective and focussed
practical training,
● industry orientation and
● multi-disciplinary approach.
The ensuing paragraphs highlight
the significance of each of the
above five aspects in developing
new age professional accountants.
Enriched learning
methodologies
Technology enabled learning
and assessment for Self-paced
Online Modules – In the New
Scheme of Education and Training,
the concept of Self-paced Online
modules [SETS A, B, C and D] has
been introduced, wherein learning
would be technology enabled and
assessment would also be online.
An aspiring CA, after passing
both groups of Intermediate
Examination, has to qualify four
Self-paced Online Modules to
be eligible for appearing in Final
Examination. He can qualify the
Self-paced Online Modules at his
own pace, as the nomenclature
indicates, and imbibe the requisite
knowledge.
Learning would be technology
enabled and aspiring CAs will
gain knowledge of the specific

www.icai.org NOVEMBER 2023 35

580
THEME
subject by undergoing requisite
hours of study prescribed. The
module would contain self-
assessment quizzes, through
which they can check their
level of understanding of the
different topics and track their
progress. Such enriched learning
methodologies will make learning
more interesting and engaging
and at the same time equip them
with the requisite professional
knowledge and skills.
BoS Mobile App and Live
Learning Classes – The Board
of Studies (Academic) provides
a comprehensive package of
learning material to enhance
student learning and facilitate in
preparation for the examination.
These educational inputs
can be accessed through the
BoS Knowledge Portal on the
Institute’s website as well as
through the BoS Mobile App,
which is a digital initiative of
Board of Studies in line with the
Hon’ble Prime Minister’s vision
of Digital India. The BoS learning
material includes –
● Value added Student
friendly Study Material
with extensive learning
aids like flow charts,
diagrams and tables to
enhance understanding of
concepts and provisions;
and illustrations and test
your knowledge questions to
assess the understanding of
concepts and provisions.
● Revision Test Papers to
facilitate revision through
questions and answers and
provide relevant updates in
different subject areas.
● Mock Test Papers to enable
students to assess their
level of preparedness for
examination.
● Suggested Answers to
understand the ideal manner
of answering questions set at
the examination.
36 NOVEMBER 2023
● Revision Capsules (with
smart arts/diagrams/tables)
on specific topics in various
subjects of the CA course
in every issue of monthly
students journal to assist
students in effective revision
before the examination.
● Saransh – Last Mile
Referencer for individual
subjects, wherein the
significant concepts dealt with
across topics in the relevant
subject are captured by way
of colourful diagrams, flow
charts and tables to facilitate
the reader to grasp the
essence of the subject and
serve as a ready reckoner.
Live Learning Classes are
being organised free of cost
for subjects at the Foundation,
Intermediate and Final levels.
The sessions are being delivered
online by subject experts to
students spread across the
length and breadth of the
country. Students can view these
sessions from the comfort of
their homes and raise queries
real time through chat boxes in
the course of the sessions and
have them resolved.
Thus, through the BoS Mobile
App, a student can access all
learning material of BoS, live
learning classes, recorded
lectures and also have their
queries resolved on any of the
publications/activities of BoS.
These digital initiatives have
changed the way in which
education is imparted and helped
bridge the distance learning gap
in CA education. By delivering
quality education through
digital means to reach every
nook and corner of the country,
ICAI has facilitated acquisition
of professional knowledge by
aspiring CAs residing in small
towns and villages, so that
they are adequately equipped
to qualify the CA examination
and emerge as professional
THE CHARTERED ACCOUNTANT
accountants and contribute to
nation building.
MCQ Paper Practice
Dashboard – An online Multiple-
Choice Questions (MCQ) Paper
Practice Dashboard has been
launched on 1st July, 2023.
This is a user-friendly platform
wherein students can practice
solving MCQs to self-assess their
understanding and preparedness
paper-wise. The platform is
available to the students through
‘BoS Knowledge Portal’ as well
as ‘BoS Mobile App’. The Login-
based Students’ Dashboard
allows the students to generate
their own test based on
individual chapter/combination
of chapters or entire syllabus
and attempt these tests to self-
assess their understanding and
preparedness. Each question is
categorized as Easy, Medium, or
Difficult and there is a scorecard
after each test providing a
complete summary of the
students’ performance question-
wise. Solving these MCQs will
help aspiring CAs hone their
problem solving and analytical
skills and develop the requisite
technical competence.
Honing problem solving
and analytical skills
Cogent and holistic skill
assessment
Objective type questions –
Objective type questions are an
effective and efficient way to
assess students’ learning, not
only at lower cognitive levels of
comprehension and knowledge,
but also at higher levels of
application, analysis, evaluation
and synthesis. They are
consistent and reliable methods
of assessment of professional
competence and facilitate
effective evaluation.
Accordingly, in the New Scheme,
the assessment of Self-paced
Online Modules would be by
www.icai.org

THE CHARTERED ACCOUNTANT
way of a combination of case
scenario based MCQs and
independent MCQs. Also,
assessment would be by way
of Case scenario based MCQs
for 30 marks in all papers at the
Intermediate and Final levels.
As mentioned earlier, the MCQ
Paper Practice Dashboard will
help aspiring CAs hone their
analytical skills.
Progression of skills
over different levels – At
the Foundation level, the
comprehension, knowledge
and application skills would be
assessed through 4 papers –
Accounting, Business Laws,
Quantitative Aptitude and
Business Economics. At the
Foundation level Intermediate level
Analysis
Application Application
Comprehension Comprehension
Knowledge Knowledge
The progression in skills over
different levels will help aspiring
CAs acquire the requisite
professional knowledge and
skills at each level and ultimately,
acquire the desired level of
professional competence at the
point of qualification.
Multi-disciplinary case study
to assess overall professional
competence – In order to
assess the overall professional
competence acquired through
academic education and
practical training at the point
of qualification, “Integrated
Business Solutions” has been
introduced at the final level,
which is a multi-disciplinary
Case Study based open book
paper. The paper would assess
the strategic problem solving
and decision-making skills.
www.icai.org
Intermediate level, the focus
would be more on application
and analysis vis-à-vis
comprehension and knowledge.
The six papers at this level
are Advanced Accounting,
Corporate and Other Laws and
Taxation in Group I; and Cost
and Management Accounting,
Auditing and Ethics, Financial
Management and Strategic
Management in Group II. At
the Final level, the evaluation
and synthesis skills are also
assessed. The six papers at this
level are Financial Reporting,
Advanced Financial Management
and Advanced Auditing,
Assurance and Professional
Ethics in Group I; and Direct Tax
Laws and International Taxation,
SETS C & D SETS A & B
Evaluation
Synthesis
Analysis Analysis
Application Application
Comprehension Comprehension
Knowledge Knowledge
Acquisition of such higher order
skills will enable qualifying
chartered accountants to play
a vital role in organisational
decision-making as a “business
solutions provider”. They would
acquire the ability to analyze
financial and non-financial
data in the context of broader
business objectives, enabling
them to provide insights that
drive growth and profitability.
Furthermore, they would excel
in problem-solving and finding
creative solutions to complex
business challenges.
Two-level Soft-skills and
Information technology training
– The two level soft-skills and
information technology training
would continue in the New
Scheme to equip the aspiring
CAs with good communication,
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THEME
Indirect Tax Laws and Integrated
Business Solutions in Group II.
As regards Self-paced Online
Modules, in SET A Corporate
and Economic Laws and SET B
Strategic Cost and Performance
Management, expert level of
knowledge is expected, and
hence, more emphasis would
be on assessment of application
and analysis and evaluation and
synthesis skills. In SETS C &
D, working level of knowledge
is expected and hence, the
comprehension, knowledge,
application and analysis skills
would be assessed. The skill
assessment is depicted in the
following diagram –
Final level
Evaluation
Synthesis
Analysis
Application
Comprehension
Knowledge
interpersonal and leadership
skills as well as technology skills.
Aspiring CAs are required to
complete Integrated Course
on Information Technology
and Soft Skills (ICITSS) before
commencement of the Practical
Training. After completion of
practical training and before
appearing in Final Examination,
they have to undergo and qualify
Advanced ICITSS (i.e., Advanced
ITT and Management and
Communication Skills).
The objective of ICITSS is to
develop an understanding on the
use of Information Technology
in the field of accounting
and auditing and develop
Technology and
Communication Skills
NOVEMBER 2023 37
582
THEME
Aspiring CAs are
required to complete
Integrated Course on
Information Technology
and Soft Skills (ICITSS)
before commencement
of the Practical
Training.
communication and presentation
skills in aspiring CAs.
Advanced ITT aims to develop in
aspiring CAs, an understanding
of the intricacies of forensic
accounting and fraud detection, of
the importance of digital forensics
& cyber security, and provide
training focused on auditing of
Financial Business Processes in
SAP/Oracle/MS Dynamics, etc.
and impart hands-on experience
through Data Analytical tools.
Management and Communication
Skills (MCS) aims to develop an
aspiring CA’s interpersonal and
leadership skills, provide them an
understanding of contemporary
business environment and
opportunities and inculcate
in them, adaptability and
accountability.
Development of these technology
and communication skills are an
integral part of development of
overall professional competence
of aspiring CAs. These skills
will enable them to interact with
clients/stakeholders and harness
their ability to articulate financial
concepts effectively.
Effective and focussed
practical training
Practical training is the USP of the
CA course of ICAI. It plays a vital
role not only in developing the
professional skills of an aspiring
CA, but also ingraining in them
the professional ethics. Practical
training facilitates developing
of professional knowledge
and professional skills as also
38 NOVEMBER 2023
Inculcating Professional
Values
inculcating professional values,
ethics and attitudes in aspiring
CAs, to achieve the desired level
of professional competence.
In the New Scheme, an aspiring
CA can commence Practical
training only after passing both
the groups of Intermediate
examination. Also, he would
be eligible to appear in Final
examination only six months after
the end of the practical training
period. Thus, the two-year
practical training period would
be seamless and uninterrupted,
where an aspiring CA can focus
completely on his practical
training and acquire the requisite
professional skills.
Industry orientation
Electives introduced in SET C
of Self-paced Online Modules
would provide the necessary
industry orientation. There
are ten electives in SET C out
of which an aspiring CA can
choose any one. The electives
include Risk Management,
Financial Services and Capital
Markets, Forensic Accounting,
Sustainable Development and
Sustainability Reporting, Public
Finance and Government
Accounting, International
Taxation, Valuation, Forex and
Treasury Management etc.
Industrial training which an
aspiring CA can opt for in the
last leg of practical training for a
period of 9 to 12 months will also
provide him industry exposure.
Multi-disciplinary approach
National Education Policy, 2020
(NEP 2020) advocates holistic
and multidisciplinary education,
which would aim to develop all
capacities of human beings –
intellectual, aesthetic, social,
physical, emotional, and moral in
an integrated manner. Such an
THE CHARTERED ACCOUNTANT
education will help develop well-
rounded individuals who possess
critical 21st century capacities in
fields across the arts, humanities,
social sciences, professional,
technical, and vocational fields.
Accordingly, in the CA course,
subjects like Psychology and
Philosophy, Constitution and Art
of advocacy, Entrepreneurship
and Start-up Ecosystem, Digital
Ecosystem and Controls have
been included as Self-paced
Online modules in SET D in
line with the multi-disciplinary
approach envisaged in NEP, 2020.
Psychology and Philosophy
and Art of advocacy would
help the chartered accountants
to understand the psychology
of clients and communicate
effectively with clients,
management and stakeholders.
India has lately witnessed
an unprecedented rise in the
number of unicorns being set-
up thereby making it the third
largest start-up ecosystem in
the world after US and China.
Entrepreneurship and start-
ups, being conventionally
predominated by information
technology professionals has,
in the recent years, garnered
the attention of chartered
accountants who seek certain
stake in the start-ups in lieu
of their advisory services. The
holistic financial, management
and compliance expertise
possessed by chartered
accountants make them a
preferred choice for conceiving
novel ideas for start-ups.
Also, chartered accountants
can assist the Government in
public policy making, for which
it is important to understand the
Constitutional and institutional
framework from which the
authority and power to formulate
policies is derived.
Ethics
www.icai.org

THE CHARTERED ACCOUNTANT
In the wake of
recent financial and
cyber frauds, there is
a compelling necessity
for specialization in the
area of forensic
accounting.
In the age of digitization,
chartered accountants must
possess a strong foundation in
digital tools and technologies.
This includes proficiency in
financial software, data analytics
platforms, and emerging
technologies like Blockchain
and Artificial Intelligence (AI).
Digital Ecosystem and Controls
would help them understand
how to leverage these tools to
enhance efficiency, accuracy
and decision-making capabilities
within financial processes.
Also, in line with the
recommendation of NEP, 2020,
Ethics has been integrated with
the subjects at the Final level so
that ethical values are ingrained in
core aspects of student learning.
This will ensure that they consider
the ethical implications while
performing audit, advising their
clients and certifying reports
when they qualify as a chartered
accountant.
New Avenues for chartered
accountants
In the last decade, new avenues
for the profession have opened
www.icai.org
up, such as, forensic accounting,
sustainability reporting, valuation,
dispute resolution and risk
management. Considering the
need for chartered accountants
to widen their horizon of
knowledge and acquire new skills
to perform these roles effectively,
these subjects have been
included as Self-paced Online
Modules in the New Scheme.
Growth of business in a country
creates demand for experts in
corporate and economic laws
to navigate the complex legal
landscape. Accordingly, in the
New Scheme, Corporate and
Economic Laws is a compulsory
Self-paced Online Module [SET
A], in addition to “Business
Laws” at the Foundation level
and “Corporate and Other Laws”
at the Intermediate level. Also,
specialised areas like mergers
and acquisitions, insolvency
and bankruptcy, arbitration
and conciliation are pulsating
with activity, demanding skilled
professionals equipped with
knowledge of various laws.
Arbitration and Conciliation
are efficient modes of dispute
resolution, saving considerable
time and money. Insolvency
resolution in a time bound
manner would maximise the
value of assets of the entity
and balance the interests of all
the stakeholders. Chartered
Accountants, equipped with
good knowledge of these
laws, can help in effective and
timely resolution of disputes.
Accordingly, the Insolvency and
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THEME
Arbitration and conciliation
Bankruptcy Code, 2016 and the
Arbitration and Conciliation Act,
1996 have been included as Self-
paced Online Modules in SET C.
The role of a chartered
accountant in implementation
of strategy involves funding
the organization’s strategic
options, as well as creating key
performance indicators (KPIs)
to measure the organization’s
progress vis-a-vis strategy
plan. Keeping in mind the
significant role which chartered
accountants can play in this area,
Strategic Cost and Performance
Management has been included
as a mandatory Self-paced
Online Module [SET B].
In the wake of recent financial
and cyber frauds, there is
a compelling necessity for
specialization in the area of
forensic accounting. Forensic
accounting and fraud detection
involves practice of utilizing
accounting, auditing, Computer
Assisted Audit Techniques
or data mining tools and
investigative skills to detect
frauds or mistakes. The past few
years have witnessed a steep
rise in the demand for forensic
accountants, considering which
forensic accounting has been
included as an elective in SET C.
Chartered Accountants
can also play a key role in
formulating policy for risk
management, building a
culture of risk awareness within
the organisation including
appropriate education and
training, establishing an internal
risk management policy,
developing risk response
processes including contingency
and business continuity
programme. Considering the
important role which CAs
can play in mitigating risks,
Risk Management has been
NOVEMBER 2023 39
584
THEME
introduced as an elective in
SET C, so that aspiring CAs get
exposure in this important field of
specialisation.
Sustainability Reporting
Sustainability reporting in India
is advancing swiftly owing
to growing recognition of
ESG aspects - Environment,
Social and Governance within
Indian businesses, regulatory
bodies, and investors. Building
a sustainable and resilient
economy necessitates a
transformation in business
models and a reoriented financial
and regulatory framework
that fosters transparency and
encourages proactive measures.
Moreover, Securities and
Exchange Board of India (SEBI)
has mandated the Business
Responsibility and Sustainability
Reporting (BRSR) for top 1,000
listed companies from financial
year 2022-23 and BRSR core
for top 150 listed companies
from financial year 2023-24.
Considering the importance
of this area, “Sustainable
Development and Sustainability
Reporting” has been included as
an elective in SET C.
Valuation is a specialised area
which serves as a reference
for evaluation of choices and
decision-making in situations
such as insolvency, mergers
and acquisitions, and fund
raising, etc. Several global
Forex and Treasury
management
subject will develop
the professionals
in analysing the
international financial
environment and
advising banks,
intermediaries etc.
40 NOVEMBER 2023
financial crises are attributable to
inadequate valuation practices.
Therefore, the vision of regulators
and the Government in India
for the valuation profession is
to develop it as a discipline of
knowledge such that valuers are
not only valuation professionals,
but also the most valuable
professionals. In order to develop
a comprehensive understanding
of valuation including its
methodologies, techniques,
and approaches, along with the
regulatory requirements and
valuation framework, the elective
subject “Valuation” has been
included in SET C.
The subject “Public Finance
and Government Accounting”
has been included as an
elective in SET C in order to
orient chartered accountants
on the key role played by the
accounting profession in public
financial management. This
would encourage chartered
accountants in understanding
the economic policies of the
Government and advising the
Government in crucial decisions
with respect to budgets, public
funds etc.
Globalisation has resulted in the
entire world virtually becoming
one market and consequently,
international taxation has
become a key concern for
business enterprises engaged
in cross border transactions
as also for tax administrations
of the concerned jurisdictions.
In a technology enabled
business scenario, where an
entity operates from many
establishments spread across
the globe, chartered accountants
have to be well versed with the
nuances of international taxation
to be able to give an informed
and correct advice and ensure
compliance with tax laws. With
this objective, International
Taxation is included as an
elective in SET C. It also forms
THE CHARTERED ACCOUNTANT
part of Final Paper 4 Direct Tax
Laws and International Taxation.
Forex and Treasury management
subject will develop the
professionals in analysing
the international financial
environment and advising banks,
intermediaries etc. In the realm
of Financial Services and Capital
Markets, a chartered accountant
can render services in investment
banking, portfolio management
and related fields. Moreover, a
chartered accountant can also
offer financial advisory services.
In order to give exposure
to aspiring CAs in this area,
Financial Services and Capital
Markets and Forex and Treasury
Management have been included
as electives in SET C.
Financial Services and
Capital Markets
Chartered Accountant
as a “Business Solution
Provider”
The New Scheme of Education
and Training of ICAI paves way
for chartered accountants to
venture into newer avenues and
specialise in niche areas of the
profession. They can significantly
contribute to mitigating risks,
driving value and formulating
the future strategy of an
organization. With their holistic
professional knowledge and
refined professional skills, they
can effectively perform the role
of a “business solution provider”.
Thus, the New Scheme of
Education and Training of ICAI,
with its enriched features,
will shape aspiring CAs to
become New Age Professional
Accountants.

Authors may be reached at
psdos@icai.in and
eboard@icai.in
www.icai.org
586

RISK MANAGEMENT THE CHARTERED ACCOUNTANT

Fraud Risk Management

CA. Partho Sathi Ghosh
Member of the Institute
Organizations are adopting a more proactive approach to
managing fraud rather than a reactive one, to assess and
manage it more efficiently and minimize, if not eliminate,
the damages caused by fraud incidences. This is due
to the rising incidences of fraud as well as the rising
regulations and compliances related to it. This means
that companies are continuously assessing the risk of
fraud in order to dissuade and prevent any fraudulent
conduct from occurring, as opposed to waiting for an
incident to occur before learning the modus operandi,
culprit, and amount of loss. The Fraud Risk Management
Framework enters the picture in this situation.

E
very organization,
regardless of size, is
vulnerable to fraud. The
possibility and occurrence of
fraud can have a negative effect
on the organization’s revenue
and goodwill, which in turn
can also have an influence on
shareholder trust and operational
continuation.
Recent studies and research
have emphasized how important
these fraud risks have become.
These risks are present in firms
worldwide, regardless of industry
or geographic location. According
to the ACFE’s 2022 report to the
nation, the overall loss brought
on by fraud is $3.6 Billion, based
on a study done in 2110 incidents
across 133 countries. Another
crucial figure is the amount of
time it takes to identify a scam,
which is alarmingly long at 12
months for organizations with
fraud hotlines and 18 months
for those without fraud hotlines.
According to the report, fraud
costs a firm, on average, 5% of its
annual revenue.
The amount of financial fraud
in the banking sector is also
published by RBI in its yearly
report. According to the RBI,
scams involving INR 1 Lakh and
higher were discovered in FY
2020–21 for a total of 1,38,422
crore, up from INR 71,543 in FY
2018–19. This represents a rise
of more than 190% in just two
years. The number of incidents
that in the banking industry
during the year, not the number
of fraud that occurred in FY
2019–20, needs to be kept in
mind in this situation.
As per RBI “the average time lag
between the date of occurrence
of frauds and the date of
detection was 23 months for
the frauds reported in 2020-21,
However, in respect of large
frauds of INR 100 Crore and
above, the average lag was 57
months for the same period”.
With the adoption of technology,
fraud risk is continuously rising
and changing, necessitating the
establishment of a robust and
efficient fraud risk management
system to ensure that growth is
not compromised and the loss
resulting from fraud is kept to a
minimum.
This article attempts to provide
a quick introduction to fraud,
analyze the numerous elements
that contribute to or increase
the likelihood of fraud, and
explain how an efficient fraud
risk management system aids in
lowering the likelihood of fraud.
Why Fraud Risk Management
is important
Fraud risk management is crucial
for businesses and organizations
because it aids in the discovery,
assessment, and cost-mitigation
of risks and expenses connected
with fraudulent actions. Fraud
can take many different forms,
including financial fraud, asset
theft, and corruption, and they
can cause organizations to
suffer large financial losses,
reputational harm, and legal
repercussions.
For enterprises and organizations,
fraud can lead to huge financial
losses. Fraudulent behaviour can
result in both direct losses (such
as the theft of property or money),
and indirect losses (such as harm
to one’s reputation and loss of
client trust). Businesses benefit
from fraud risk management by

42 NOVEMBER 2023 www.icai.org


THE CHARTERED ACCOUNTANT
Fraud risk
management is
crucial for businesses and
organizations because
it aids in the discovery,
assessment, and cost-
mitigation of risks and
expenses connected with
fraudulent actions.
preventing or reducing these
losses.
Financial Loss
Organizations may suffer large
financial losses as a result
of fraudulent activity. For
instance, fraud may result in
misappropriated funds, unlawful
expenditures, and false claims.
Such losses, which may have an
influence on the organization’s
financial health, can be found
and prevented with the aid of
effective fraud risk management.
Legal Consequences
Organizations may be held legally
liable for fraud, which could cost
them money in expensive legal
battles, and regulatory fines
and penalties. Regulations and
standards pertaining to fraud
prevention and risk management
must be followed by many
businesses. These regulations
must be followed, or serious
financial and legal repercussions
could occur.
Reputational Damage
Fraud can damage an
organization’s reputation, which
can lead to a decline in consumer,
investor, and stakeholder
trust and loyalty. Rebuilding a
company’s reputation can take
years, and doing so might have a
major financial impact.
Operational Disruption
Fraudulent actions can prevent
a company or organization from
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RISK MANAGEMENT
operating normally. Delays in the
supply of goods and services,
lost productivity, and strained
relationships with suppliers and
clients can all result from this.
Sustainability
Strong corporate governance
and moral business conduct
are essential for a sustainable
business strategy. Organizations
may make sure they have a solid
basis for long-term growth and
development by putting in place a
fraud risk management program.
Overall, fraud risk management
is crucial since it aids firms in
defending themselves against
the dangers and expenses
linked to fraud. They can use it
to identify, stop, and deal with
fraud, reducing the possibility
of financial loss, reputational
harm, legal repercussions, and
showing their dedication to moral
corporate conduct.
How fraud vulnerabilities
and exposures vary across
sectors
Due to variations in their
operations, procedures, and
activities, fraud vulnerabilities
and exposures might differ
among various sectors.
Industrial sectors
Industry areas like manufacturing,
construction, and energy are
susceptible to supply chain
management, inventory, and
procurement fraud. For instance,
fraudsters may raise prices or
divert funds to phony vendors
by taking advantage of flaws in
procurement procedures. These
industries are also susceptible to
fraudulent inventory management
operations, including theft and
misappropriation.
Service sectors
Financial, medical, and retail
industries that provide services
are susceptible to fraud
involving consumer information,
billing, and payments. For
587
instance, fraudsters may
overcharge clients or fabricate
billing statements by taking
advantage of flaws in the billing
and payment procedures.
Furthermore, many industries are
susceptible to data breaches and
other illicit acts involving client
information.
IT sectors
Software development,
cybersecurity, and cloud
computing are examples of IT
industries that are susceptible
to intellectual property fraud,
cyberattacks, and compliance
issues. For instance, thieves
may use gaps in intellectual
property management to
misappropriate or steal
confidential information. These
industries may also experience
fraudulent cybersecurity-related
activities, including phishing,
malware, and ransomware
assaults.
Government sectors
Public administration, law
enforcement, and the military
are examples of government
sectors that are susceptible
to fraud involving grants,
subsidies, and procurement.
For instance, fraudsters may
manipulate bids or redirect
money to phony vendors by
taking advantage of flaws
in procurement procedures.
Moreover, these industries are
susceptible to grant and subsidy
fraud, including making false
claims and double-dipping.
In conclusion, due to
differences in their operations,
procedures, and activities,
industrial and service sectors
can have different fraud
vulnerabilities and exposures.
An in-depth comprehension
of these vulnerabilities
and exposures, as well as
specialized strategies to
handle them, are necessary
for effective fraud risk
management.
NOVEMBER 2023 43
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RISK MANAGEMENT
Strong corporate
governance and
moral business conduct are
essential for a sustainable
business strategy.
How technology advances
have made us more
vulnerable to fraud
Several elements of our lives
have become simpler and
easy because of technological
advancements, but they have
also exposed new weaknesses
that scammers can take
advantage of.
1. Cloud Services
Large volumes of data may
now be stored and accessed
more easily for organizations,
thanks to the use of cloud
services. Nevertheless, it
also implies that private
information is kept off-
site, increasing the risk of
cyberattacks, especially if the
data is not well protected, or
if third-party cloud service
providers are not properly
screened. Cybercriminals can
access sensitive data without
authorization by taking
advantage of flaws in cloud
services.
2. Outsourcing
Many organizations contract
with outside companies to
handle certain duties like IT
support or customer service.
As the third-party provider
might not have the same level
of security measures in place
as the firm itself, this can raise
the risk of fraud. Furthermore,
outsourcing may make it more
challenging for companies
to monitor and regulate
user access to confidential
information. It’s crucial to
thoroughly investigate third-
party providers and make
44 NOVEMBER 2023
sure they have the necessary
security procedures in place.
3. Bring Your Own Device
(BYOD)
BYOD policies permit
employees to use their
own devices, like laptops
or smartphones, for work-
related tasks. These policies
may also increase the risk of
fraud, especially if employees
use their personal devices to
access company data without
proper security protections.
Personal devices could not be
as secure as those given by
the firm, making them more
susceptible to data theft or
hacking.
4. Administrator Privileges
Giving employees
administrator rights can also
be risky because it could
provide them access to private
information they might not
require while executing their
jobs. Only individuals who
truly need admin capabilities
should have access to them,
and monitoring should be
in place to make sure that
these privileges are not being
abused.
5. Availability vs Security
Conundrum
The trade-off between making
systems available and making
them secure is referred to as
the availability vs. security
conundrum. Because
performance can be slowed
down by security measures
like firewalls and access
controls, a system or network
that is highly secure might
also be less available. On the
other side, a highly available
system or network could have
fewer security safeguards in
place to assure quick access,
making it less secure.
In general, technological tools
can significantly reduce the risk
of fraud. Companies should
regularly evaluate their exposure
THE CHARTERED ACCOUNTANT
to risk and spend money on
the right technological tools to
deal with these risks. In order to
make sure that security protocols
continue to be effective against
evolving threats, it is also crucial
to continuously examine and
update/upgrade them.
How to leverage technology
to mitigate fraud risk
Technological tools can be used
to reduce the risk of fraud by
putting in place certain security
measures. These are a few
instances:
1. Chip Cards
Advanced encryption (EMV)
technology is used by chip
cards to secure data and
prevent fraud. It is far more
challenging for fraudsters
to copy the card or steal
the cardholder’s information
because the chip creates
a unique code for each
transaction.
2. Biometric Devices
To confirm the user’s
identification, biometric
gadgets use distinctive
physical traits like fingerprints
or facial (IRIS) recognition.
Because it is significantly
more difficult to falsify
biometric data, biometric
authentication systems
can be more secure than
conventional password-based
systems.
3. Privileged Access
Management
A system for controlling
and monitoring privileged
access to sensitive data
is known as privileged
access management
(PAM). By imposing strict
authentication procedures,
keeping an eye on access
activities, and limiting access
to (“Need to know; Need to
have”) those who truly need
it, PAM solutions can aid
in preventing illegal access
www.icai.org

THE CHARTERED ACCOUNTANT
Public administration,
law enforcement, and
the military are examples
of government sectors that
are susceptible to fraud
involving grants, subsidies,
and procurement.
to crucial systems and
data. This technology can
lessen the effects of external
breaches and assist in
preventing insider threats.
4. Blockchain
Blockchain technology
offers a decentralized and
secure method of storing and
exchanging data, making it
more challenging for thieves
and fraudsters to alter data
or steal information. The
management of supply chains
and financial transactions
both benefit greatly from this
technology.
5. Continuous Real-Time
Monitoring
Constant real-time monitoring
uses machine learning and
advanced analytics to spot
anomalies and possible fraud
in real time. This lowers the
risk of fraud by enabling firms
to recognize and address
possible risks early. This
technology is very helpful in
identifying insider threats and
user behavior anomalies.
Responding to non-verbal
and behavioral cues to detect
fraud early
Understanding behavioral and
nonverbal signs that might
point to fraud is necessary for
early fraud detection. There are
several methods for interpreting
behavioral and nonverbal signs
to identify fraud early and classify
the risk to employees, suppliers,
and clients:
www.icai.org
RISK MANAGEMENT
1. Behavioral Analytics
Using data analysis tools to
identify patterns of behavior
that can point to fraud is
known as behavioral analytics.
Organizations can spot
abnormalities and patterns
of behavior that can point
to fraudulent conduct by
examining data from a variety
of sources, including financial
transactions, email, and other
interactions.
2. Employee Risk
Classification
Employees are categorized
according to their level
of access to confidential
information and their
likelihood of committing
fraud. Organizations can put
in place proper controls and
monitoring mechanisms to
stop and catch fraudulent
conduct by categorizing
personnel based on risk
level.
During interviews, meetings,
and interactions with
coworkers, the employees’
behavior and body language
can reveal important clues
about their honesty and
integrity. During an interview
or chat, for instance, if a
worker avoids eye contact,
fidgets, or otherwise exhibits
signs of nervousness, that
could be a warning sign that
they are not being genuine.
3. Supplier Risk Classification
Supplier risk classification
entails classifying suppliers
according to their degree
of fraud risk, much like
employee risk classification.
Organizations can lower the
risk of fraud in their supply
chain by identifying high-
risk suppliers and putting
in place proper controls
and monitoring methods.
While dealing with suppliers,
keeping an eye on their
actions during discussions,
589
site visits, and inspections
might reveal information
about their dependability and
reliability. A supplier may be
concealing something if, for
instance, they are defensive
or evasive when questioned
about their quality control
procedures or if they won’t
allow site visits.
4. Customer Risk
Classification
Customer risk classification
entails grouping consumers
according to how likely
they are to commit fraud.
Businesses can lower the
risk of fraud in their sales
process by identifying
high-risk consumers and
putting in place necessary
controls and monitoring
systems. When it comes to
customers, watching how
they behave throughout
transactions and interactions
with staff members might
reveal information about their
motivations and reliability.
For instance, a customer who
is excessively demanding,
pushy, or insistent on special
treatment may be trying
to take advantage of the
business.
5. Non-Verbal and Behavioral
Cues
Behavioral and nonverbal
signs can also give key
information about potentially
fraudulent behavior. For
instance, behavioral changes,
like an abrupt increase in
secrecy or defensiveness,
can be a sign of fraud.
Organizations can identify
fraud early and take necessary
action by educating staff to
notice these indicators and
report questionable conduct.
Organizations can use
technology to help fraud
detection and risk classification
in addition to observing non-
verbal and behavioral clues.
NOVEMBER 2023 45
590
RISK MANAGEMENT
To identify suspicious behavior
and potential fraud threats,
for instance, trends in bank
transactions, social media activity,
and other, pertinent data sources
can be analyzed using data
analytics and machine learning
algorithms. Employees who get
regular training and awareness
programs may also be better
able to identify and respond to
possible fraud concerns.
Staying abreast of technology
changes and identifying new
risks and retiring old ones
Maintaining an efficient fraud risk
management program requires
keeping up with technological
advancements, detecting new
risks, and retiring old ones. Here
are a few methods to do that:
1. Regular Risk Assessments
Regular risk assessments are
necessary to pinpoint potential
weak spots and confirm the
effectiveness of the current
safeguards. An assessment
of cutting-edge technology
and modifications to the threat
environment should be part of
this. Regular risk assessments
can be used to find emerging
threats and vulnerabilities.
To find any potential flaws or
gaps in the current controls,
this approach should include
a complete evaluation of all
business processes, systems,
and controls.
2. Continuous Monitoring
Use ongoing monitoring
to identify potential fraud
threats and take immediate
action. The use of data
analytics, machine learning
algorithms, and other cutting-
edge technology can be
part of this to find trends
and abnormalities in data
that might point to fraud.
Controls’ shortcomings and
vulnerabilities can be found by
routinely testing and analyzing
controls. To make sure that
systems and procedures
46 NOVEMBER 2023
are safe and efficient,
regular penetration testing,
vulnerability assessments, and
other security checks must be
conducted.
3. Cybersecurity Frameworks
To be sure that your company
is following industry best
practices and standards for
protecting sensitive data and
systems, adopt a cybersecurity
framework like NIST, ISO, or
CIS.
4. Engage with industry groups
and experts
Insights into new trends
and best practices can be
gained by taking part in
industry groups and visiting
conferences, and events.
These networks can also be
a great resource for learning
about emerging dangers and
weaknesses.
5. Stay Informed
By engaging in industry
groups, attending conferences,
and reading relevant
publications and blogs, you
may keep up with the latest
developments in fraud risk
management technology and
trends. Staying abreast of new
technological developments
can aid businesses in spotting
new threats and potential weak
spots. This entails keeping
up with new platforms and
tools that cybercriminals may
use, as well as fresh security
measures that may be put in
place to lessen these threats.
6. Monitor regulatory changes
To make sure that fraud
prevention and risk
management techniques
are efficient and current, it is
crucial to stay up to speed
with regulatory changes and
compliance standards.
7. Retiring Old Risks
Review past risks frequently
and retire them if they are no
THE CHARTERED ACCOUNTANT
longer necessary or have been
sufficiently mitigated. By doing
this, you can make sure that
your efforts are directed at the
biggest and most urgent fraud
risks.
8. Training and Education
Employees should get regular
training and education on
the newest fraud dangers,
prevention methods, and best
practices. This can involve
acting out phishing scams,
educating people about
cybersecurity, and setting up
a system for staff members to
report suspected fraud.
In general, keeping up with
technological advancements
and spotting new threats
while eliminating old ones is a
continuous process that calls for
a proactive and watchful attitude.
Organizations can maintain
efficient fraud prevention and
risk management strategies
by periodically evaluating and
updating risk assessments,
maintaining current on developing
technologies, consulting with
industry experts, keeping track of
legislative changes, and routinely
testing and reviewing controls.
In general, organizations with
robust anti-fraud policies are
often better at identifying and
stopping fraud, whereas those
with weak fraud risk management
procedures are more likely to
sustain monetary losses and
reputational harm. Companies
can reduce their risk of fraud and
safeguard their bottom line by
developing comprehensive fraud
prevention programs that include
stringent ethical standards,
regular risk assessments,
proactive fraud detection and
prevention methods, and a culture
of transparency and responsibility.

Author may be reached at
caparthoghosh@yahoo.com and
eboard@icai.in
www.icai.org
592

TECHNOLOGY THE CHARTERED ACCOUNTANT

Chartered Accountants:
Can AI Replace Them?
CA. Mohit Sharma
Member of the Institute
The development of artificial intelligence (AI) in the recent
years has fundamentally altered the accounting industry. AI
has the potential to completely change the way accounting
professionals conduct their work, thanks to its capacity for
automating repetitive operations, analysing vast amounts of
data, and producing precise predictions. But this possibility
raises the question of whether AI can take the role of Chartered
Accountants (CAs). CAs play a crucial role in business. They
are in-charge of making sure that the financial statements are
truthful, fair, and lawful. CAs are essential for the financial
performance of businesses and have extensive training,
expertise, and experience required from the profession. Yet,
as technology has advanced, there is rising worry that the
emergence of Artificial Intelligence (AI) could make CAs
redundant.

T Understanding AI
he use of AI in accounting
has enormous potential
and has the ability to
revolutionise how financial
transactions are recorded,
examined, and reported. The
speed, accuracy, and efficiency
of the accounting operations can
be improved by the automation of
repetitive jobs and the application
of machine learning algorithms.
It might also result in a decline
in the need for human expertise.
The potential of AI in accounting
and whether it can eliminate
the necessity for CAs will be
discussed in this article. We’ll
also look at AI’s limitations and
talk about what this technology
means for the future of the
accounting industry. Finally, we
will discuss how CAs may use
AI to improve their services and
continue to be relevant in the
digital world.
Understanding AI is essential
before examining its potential in
accounting. Machines created
to learn from experience and
make decisions based on
information are said to be
using artificial intelligence,
which is the imitation of human
intelligence. Artificial intelligence
(AI) systems may perform tasks
that would often need human
intelligence, such as speech
recognition, decision-making,
and language translation. There
are many different types of AI,
including robotics, machine
learning, and natural language
processing.
The Role of Chartered
Accountants in the Current
Landscape
Chartered Accountants’
present responsibilities include
offering clients a variety of
financial and advisory services.
Financial reporting, auditing,
tax planning and compliance,
management consulting, and
risk management are some of
these services. The financial
businesses of firms is ensured
by Chartered Accountants, who
also support them in making
wise financial decisions. In
addition, they are accountable
for giving creditors, investors,
and regulatory agencies
accurate financial information.
CAs make sure that firms
adhere to the applicable
rules and regulations and
that their financial statements
accurately reflect their financial
performance, thanks to their
experience in financial reporting
and accounting standards.
The AI’s Accounting
Potential
The accounting enterprise
should be attuned to artificial

48 NOVEMBER 2023 www.icai.org


THE CHARTERED ACCOUNTANT
intelligence (AI). The speed,
accuracy, and performance
of accounting techniques
may be enhanced through its
capability to automate repetitive
responsibilities and provide
insightful facts. Let’s observe
the potentialities of the AI in
accounting in greater detail:
1. Automation
Automation is one of the
most vital blessings of AI
in accounting. Regular
responsibilities may be time-
investing and liable to error,
which include facts entry, bill
processing, and economic
assertion preparation. These
chores are already being
automated with AI, giving
accountants more time to
focus on intensive evaluation
and strategic decision-making.
Additionally, automation
improves economic assertion
accuracy and reduces the
scope for compliance issues
arising from human error.
2. Analysis of Data
AI is a beneficial device in
accounting due to its capability
to unexpectedly and exactly
compare large quantities of
facts. With economic facts,
machine learning algorithms can
spot styles and developments
in huge factual units that
human analysts may not see
right away. This talent can
assist accountants in growing a
greater and thorough image of
an agency’s overall economic
performance and in presenting
their customers with greater
AI is a beneficial
device in accounting
due to its capability
to unexpectedly and
exactly compare large
quantities of facts.
www.icai.org
perceptive advice. Moreover,
AI can experiment with giant
quantities of accounting facts
to locate capacity compliance
concerns and thus, reduce the
chance of non-compliance.
3. Statistical Analysis
Predictive evaluation is
present in every other place in
accounting wherein AI may be
helpful. AI is able to analyse
economic facts to locate
developments and styles that
can inform manual agency
choices that are elusive to
humans. For instance, AI is
helping businesses in figuring
out capacity price savings,
forecasting overall economic
performance, and optimising
pricing plans.
4. Better Reporting
AI can gain economic reporting
as well. Using AI, economic
statements can be created with
greater speed and accuracy,
thus reducing the opportunity
of errors and boosting
transparency. AI is likewise
helping corporations in growing
specialized reviews which
are desirable to the precision
necessary for its stakeholders.
AI’s Limitations - Difficult
to replace CAs
1. Lacks human judgement
While being able to analyse data
and spot trends, AI systems
lack the human judgement
and expertise that CAs bring
to the table. CAs are taught
to utilise their discretion to
analyse financial facts and draw
conclusions. This is crucial in
difficult situations where the
data may be ambiguous, or the
accounting treatment may be
insufficient.
2. Dependency on high-
quality data
The effectiveness of an AI
system depends on the data it is
593
TECHNOLOGY
The AI system
will generate
inaccurate results if the
data is missing or
inaccurate.
fed. The AI system will generate
inaccurate results if the data is
missing or inaccurate. CAs are
taught to spot and fix mistakes
in financial data, ensuring the
accuracy and dependability of
the financial accounts.
3. Lack of ability to
understand context
AI systems can analyse data
and find patterns, but they
are unable to understand the
context in which the data was
produced. CAs are taught to
comprehend the business
environment in which financial
data is produced, enabling
them to give clients specialised
advise.
4. Weak communication
skills
AI systems have a limitation
in stakeholder and client
communication. CAs are taught
to provide financial information
in a straightforward and
succinct manner so that clients
may make decisions based on
the information provided.
AI’s Role in the Future of
Chartered Accountants
AI’s contribution to the
accounting sector is likely to
grow as it develops and gets
better. Chartered Accountants
(CAs) may not be replaced by
AI, but it will surely alter the
way of working, it’s processing
and the competencies needed
to be successful. These are a
few possible effects of AI on the
future of the accounting sector:
NOVEMBER 2023 49
594
TECHNOLOGY
1. Increased automation of
routine tasks
Routine accounting jobs
like data entry, account
reconciliations, and financial
statement preparation will
increasingly be automated
as artificial intelligence (AI)
technologies continue to
advance. As a result, CAs will
have more time to devote to
more complex activities like
financial analysis, audits, and
strategic planning.
2. Improved accuracy and
effectiveness
AI systems can swiftly and
accurately evaluate enormous
amounts of data, lowering the
risk of errors and enhancing
the effectiveness of accounting
procedures. Clients will be
able to make decisions more
quickly and with more financial
accuracy as a result.
3. Improved risk
management
AI systems can spot trends
and oddities in financial data,
assisting CAs in identifying
possible hazards and fraud
more rapidly and accurately.
This will enable CAs to advise
customers on risk management
more effectively.
4. Increased demand for data
analysis skills
Strong data analysis skills
will be more in demand as
AI systems take over regular
activities, which will result in an
increase in the number of CAs
needed who can use AI tools to
evaluate data and give clients
insights.
5. Need for Valuable
Continued continued
learning
Continuous learning is
necessary because AI systems
will need to develop and change
over time, hence CAs must stay
50 NOVEMBER 2023
current on the newest AI tools
and methods. Those CAs who
are flexible and quick learners
will succeed.
Ultimately, even though AI has
the potential to significantly alter
the accounting profession, CAs
are unlikely to be completely
replaced by it. Instead, it will
improve CAs’ work and open
up new doors for professional
advancement. CAs who are able
to use AI as a tool and keep
improving themselves will be
well-positioned to flourish in the
accounting sector of the future.
Conclusion
Many professionals are
becoming increasingly
concerned that their
employment will soon be
overtaken by computers as
the role of artificial intelligence
(AI) continues to advance.
Chartered Accountancy is
one such profession that has
generated a lot of speculation
in this area due to its due to it’s
expensive role at intersection
of technology and accountancy
sector. However, CAs have a
variety of talents and abilities
that cannot be duplicated by
machines.
The capacity to evaluate
data and base strategic
decisions on it is one of the
main competencies held by
CAs. The human judgement
and experience, that CAs
bring to the table cannot be
replaced by AI. In order to
establish trust and make sure
that customers receive the
guidance and support they
require, it is essential to be
able to communicate with
them effectively. While AI can
offer insightful information, it
cannot take the place of the
human touch in developing
relationships with customers.
CAs are taught to examine
intricate financial data and
THE CHARTERED ACCOUNTANT
offer insights that go beyond
basic computation, in a way
that clients may comprehend.
Therefore, it seems unlikely that
machines will be able to mimic
this skill any time soon.
Additionally, CAs have a
thorough awareness of the
legal and compliance matters
that have an impact on their
clients. The ability to navigate
the regulatory landscape is
essential to the success of
any organisation, and CAs
are educated to comprehend
intricate legislation and to give
clients guidance based on their
own requirements. And, while
AI can assist with compliance
responsibilities, but it cannot
take the place of extensive
knowledge of human and his
vivid dimensions of thinking.
Despite this, there is no
disputing that AI has the
power to completely transform
the accounting sector.
Many repetitive processes
can be automated with AI,
which can also increase
accuracy, efficiency, and risk
management. As a result, CAs
may have more time to devote
to more complex activities like
financial analysis, audits, and
strategic planning.
Therefore, AI as a tool can
assist CAs’ job, serving
them to clients in fresh and
creative ways by collaborating
productively with the AI
systems.

Author may be reached at
mohitsharma463678@gmail.com
and eboard@icai.in
www.icai.org
 595

THE CHARTERED ACCOUNTANT

TECHNOLOGY

ERP Implementation: Strategies

for Efficiently Managing Business
Operations
Enterprise Resource Planning (ERP) is a powerful software
solution that integrates and manages core business processes
in a single system, providing companies with streamlined
operations, improved visibility, and enhanced decision-making
capabilities. ERP implementation is a complex undertaking
that requires careful planning, execution, and management
to ensure its success. In this article, we will explore the key
considerations and best practices for ERP implementation in
corporates.

CA. Kapil Swarankar

Member of the Institute

I Define your North Star

n today’s dynamic business
environment, corporations
face increasing challenges
in managing their operations
efficiently and effectively.
Complex systems, redundant
processes, data inconsistencies,
and a lack of real time visibility
can hinder productivity,
increase costs, and impact
customer satisfaction. ERP
implementation can help
address these challenges by
providing a unified platform that
integrates and automates core
business processes such as
finance, accounting, taxation,
supply chain management,
human resources, sales, and
marketing, and more.
The following ten strategies will
provide an overview through
the common challenges that
organizations encounter and
offer effective solutions to tackle
them:
In any ERP implementation
journey, defining your North Star,
or your ultimate objectives and
vision for the project, is a critical
step. It sets the tone for the
entire implementation process
and serves as a guiding compass
to ensure that the project stays
on track and aligns with the
overall goals and aspirations of
the business.
Implementing an ERP system
is a significant undertaking
that requires careful planning,
coordination, and execution.
Without a clear vision and
well-defined objectives, an
ERP implementation project
can quickly lose focus and
result in delays, cost overruns,
and even failure to achieve the
desired outcomes. Defining your
objectives is the foundation upon
which the entire implementation
process is built, and it ensures
that all stakeholders are aligned
towards a common goal.
Setting a crystal-clear vision
for your ERP implementation
starts with understanding
your business objectives and
aspirations. What do you hope
to achieve with the ERP system?
Are you looking to improve
operational efficiency, streamline
processes, or support business
growth? Defining your ultimate
objectives and aspirations for
the ERP implementation allows
you to establish a roadmap
and a sense of direction for the
project. Defining your North
Star also helps in involving key
stakeholders, including senior
management, department
heads, and end users. With well-
defined objectives, we can also
set benchmarks for measuring
success, and establish key
performance indicators (KPIs)

www.icai.org NOVEMBER 2023 51

596
TECHNOLOGY
A thorough needs
assessment is a
critical step in the ERP
implementation process.
It involves conducting
a comprehensive
evaluation of your
organization's existing
processes, systems,
and pain points to
identify the gaps and
inefficiencies that need to
be addressed.
and metrics to track progress of
the ERP implementation process.
Conduct a detailed needs
assessment
A thorough needs assessment
is a critical step in the ERP
implementation process.
It involves conducting a
comprehensive evaluation of
your organization’s existing
processes, systems, and pain
points to identify the gaps and
inefficiencies that need to be
addressed. By understanding the
current state of your organization
and its unique requirements, you
can ensure that the ERP solution
chosen is tailored to meet those
needs effectively.
The needs assessment
process involves analysing
your organization’s workflows,
data management practices,
and business processes to
identify areas that can benefit
from automation, streamlining,
or optimization. It also entails
identifying pain points and
challenges faced by different
departments or teams, such
as complex data, manual
processes, lack of visibility, or
redundant tasks. Collaborating
with key stakeholders from
different departments, including
52 NOVEMBER 2023
department heads, end users,
and IT personnel, is crucial
to capture all requirements
comprehensively.
During the needs assessment,
it’s important to define clear
objectives and outcomes
that you expect to achieve
with the ERP implementation.
This includes identifying the
functionalities and features that
your ERP solution must possess
to address the identified gaps
and inefficiencies. For example,
if your organization struggles
with inventory management,
your ERP solution should have
robust inventory management
capabilities. If you need to
improve financial reporting and
analysis, your ERP solution
should offer robust financial
reporting and analytics features.
Select the Perfect ERP
Solution as per your needs
Once you have a firm grasp of
your organization’s needs, it’s
time to pick the ERP solution
that aligns seamlessly with
your vision. Consider critical
factors such as scalability, user
friendliness, customization
options, integration capabilities,
and vendor support. Ensure that
the ERP solution is a perfect
fit for your unique business
THE CHARTERED ACCOUNTANT
requirements and future growth
plans.
ERP systems, such as SAP,
Microsoft Dynamics 365, Oracle,
and Tally are widely used by
organizations to streamline their
business processes and manage
their operations effectively.
Apart from licensed ERP’s,
open ERP systems can also
be good choices if the entities
are small and under a budget
constraint. Open ERP systems
offer businesses the flexibility
to avoid being restricted to a
single vendor or technology
stack, mitigating the risk of being
tied to a potentially outdated or
expensive software solution over
time. Moreover, companies can
customize the software to align
with their specific requirements
or integrate it with other
software applications in their IT
ecosystem.
The vast community of
developers contributing to the
development of open ERP
systems enhances the software’s
functionality, addresses bugs,
and provides support to users.
This community fosters the
exchange of best practices and
knowledge, resulting in better
quality and reliability of the
software. A few examples of
widely used Open ERP systems
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 597

THE CHARTERED ACCOUNTANT

TECHNOLOGY
The following table provides a brief comparison of the above mentioned ERP systems :

ERP System Performance Cost Market Share Customization User Friendliness

SAP High High Wide market Highly Moderately user

capture customizable with friendly, may
in various extensive options require training for
industries for customization new users
Microsoft Moderate Moderate Popular among Highly User friendly with
Dynamics SMEs customizable with familiar Microsoft
365 extensive options interface, suitable
for customization for SMEs
Oracle High High Significant Highly Moderate user
market capture customizable with friendliness, may
in select extensive options require training for
industries for customization new users
Tally ERP Moderate Affordable Popular Customization Highly user friendly,
among SMEs, options available, designed for SMEs
especially in but limited with minimal
India compared to training required
larger ERP
systems
Odoo Moderate Free, with Decent Customization Average
paid support options available
options

are Odoo, ERPNext, Dolibarr and
Tryton.
Choose the appropriate
ERP Vendor Partner
The role of a vendor partner in
ERP implementation is crucial
as they provide expertise,
guidance, and support
throughout the implementation
journey. The vendor partner is
typically the company that has
developed the ERP software
or provides implementation
services for the ERP system.
Their role can vary depending
on the specific agreement or
contract with the organization
implementing the ERP system.
The vendor partner works
closely with the organization to
understand their requirements
and processes and provides
consulting services to design a
customized ERP solution that
aligns with the organization’s
needs and goals. They bring
their domain knowledge and
expertise to recommend best
practices and optimal system
configurations.
The vendor partner provides
training to end users on how to
effectively use the ERP system.
This may involve conducting
training sessions, creating user
manuals, and providing ongoing
support to address user queries
and issues after go-live.
There are numerous vendor
partners in the market that
provide ERP implementation
services. These vendor
partners have extensive
experience and expertise in
implementing various ERP
systems across different
industries and regions. They
offer a wide range of services,
including consulting, system
configuration, data migration,
testing, training, support, and
change management, to ensure
successful ERP implementation
projects for their clients.
Formulate a pristine
implementation plan
A successful ERP
implementation project requires
careful planning and execution,
and a meticulous implementation
plan serves as the backbone
of the entire process. It is
essential to develop a detailed
roadmap that outlines the steps
to be followed, along with a
well-structured timeline, key
milestones, and clear roles and
responsibilities for each team
member involved.
The implementation plan should
take into account critical aspects
such as data migration, system
configuration, testing, training,
and change management. Data
migration involves transferring
data from the old system to
the new ERP system, ensuring
accuracy and integrity. System
configuration involves setting
up the ERP system according to
the specific requirements of the

www.icai.org NOVEMBER 2023 53

598
TECHNOLOGY
The role of a
vendor partner in
ERP implementation is
crucial as they provide
expertise, guidance, and
support throughout the
implementation
journey.
organization. Testing involves
thoroughly testing the ERP
system to identify and fix any
issues before going live. Training
is crucial to ensure that all team
members are familiar with the
new system and can effectively
use it in their daily tasks.
Change management involves
managing the transition process,
addressing resistance to change,
and ensuring smooth adoption of
the new ERP system.
Allocate Resources
Strategically
ERP implementation requires
significant investments in
terms of time, money, effort,
and resources. Allocating
resources strategically is
crucial to ensure a smooth and
successful implementation
journey. This includes allocating
skilled personnel who possess
the necessary expertise and
knowledge to handle different
aspects of the project, such as
project management, system
configuration, data migration,
and testing. Adequate
budget should be allocated
for hardware and software
requirements, licenses, and any
other IT infrastructure needed
for the ERP system. It is also
important to have contingency
plans in place to address
unforeseen challenges that may
arise during the implementation
process, such as technical
issues, delays, or budget
constraints.
54 NOVEMBER 2023
Proper resource allocation
is essential to ensure that
the implementation project
progresses as planned,
with adequate support and
expertise available when
needed. Insufficient allocation
of resources can lead to delays,
cost overruns, and a higher
risk of project failure. It is
important to carefully assess
the requirements of the ERP
implementation project and
allocate resources, accordingly,
taking into account the size and
complexity of the organization,
the scope of the ERP system,
and the expected timeline
for implementation. Strategic
resource allocation is a critical
factor in achieving a successful
ERP implementation that meets
the organization’s objectives and
delivers the expected benefits.
Data Migration and
Harmonious Integration
Data migration is a crucial step in
the ERP implementation process
as it involves transferring data
from previous ERP system to
the new ERP system. It requires
careful planning and execution
to ensure that data is accurately
mapped, thoroughly cleansed, and
rigorously validated to ensure its
integrity and accuracy in the new
THE CHARTERED ACCOUNTANT
system. Accurate data mapping
involves identifying and mapping
data fields from the old system
to the corresponding fields in the
new ERP system to ensure that
data is correctly transferred.
Rigorous data validation is
required to ensure the accuracy
and integrity of the migrated
data through various validation
checks and tests, to ensure that
the data is reliable and can be
used effectively in the new ERP
system. Additionally, seamless
integration with existing systems,
such as CRM (Customer
Relationship Management) or
HR (Human Resources), may
be required to ensure optimal
performance of the ERP system.
Data migration is a critical
step in ERP implementation as
inaccurate or incomplete data
can lead to incorrect reporting,
operational inefficiencies,
and decision-making errors.
Therefore, careful attention
must be given to accurate
data mapping, thorough
data cleansing, rigorous data
validation, and seamless
integration with existing systems
to ensure a successful ERP
implementation and maximize
the benefits of the new system.
www.icai.org

THE CHARTERED ACCOUNTANT
Allocating resources
strategically is
crucial to ensure a
smooth and successful
implementation
journey.
Rigorous Testing and
Quality Assurance
Testing and quality assurance
are crucial components of a
successful ERP implementation.
Rigorous testing is essential
to ensure that the ERP system
functions as intended, performs
optimally, and meets the
requirements of end users. This
includes testing the system for its
functionality, performance, and
user acceptance.
Involving end users in the
testing process is crucial as
it helps identify any issues
or discrepancies from their
perspective and allows for
necessary adjustments to be
made before the system goes
live. End user feedback is
invaluable in ensuring that the
ERP system meets the needs of
the organization and its users.
A robust testing and quality
assurance process is essential to
identify and rectify any issues or
shortcomings in the ERP system
before it goes live. This helps
minimize the risk of disruptions
or errors post implementation
and ensures a smooth transition
to the new system. Proper
testing and quality assurance
are important for a successful
ERP implementation, enabling
organizations to leverage the
full potential of the system and
achieve their desired outcomes.
Empower with Training and
Change Management
Proper training is a critical aspect
of ERP implementation to ensure
www.icai.org
that end users are proficient
in utilizing the new system. A
comprehensive training program
should be developed that
encompasses both technical
and functional training. Technical
training focuses on imparting
the knowledge and skills
required to navigate and operate
the ERP system, including
understanding the user interface,
data input, reporting, and system
customization. Functional
training, on the other hand, is
tailored to the specific roles and
responsibilities of end users,
such as finance, HR, operations,
or sales, and focuses on how to
use the ERP system to perform
their day-to-day tasks effectively.
In addition to technical and
functional training, robust change
management strategies are
crucial to address any resistance
to change and ensure seamless
adoption of the new ERP system
across the organization. Change
management involves preparing
employees for the transition,
addressing their concerns, and
providing support and guidance
throughout the implementation
process.
Proper training and change
management strategies are
indispensable to ensure that
end users are well equipped
to effectively use the new ERP
system and embrace the changes
that come with it. This helps
minimize disruption, maximizes
user adoption, and ensures that
the organization can realize the
full benefits of the ERP system.
Go Live and Post
Implementation support
The go live stage is critical
and requires careful planning
and execution to ensure a
successful transition. It involves
various activities, such as data
migration, system configuration,
user training, and testing, to
ensure that the ERP system is
599
TECHNOLOGY
functioning as intended and
meeting the organization’s
requirements. Once the ERP
system is live, it is used by end
users to perform their regular
tasks and operations, such as
creating and managing orders,
processing transactions,
generating reports, and
managing resources.
A successful go-live is essential
to the overall success of an
ERP implementation project. It
signifies that the organization has
successfully implemented the
new ERP system and is utilizing
its functionalities to support its
business processes. However,
go-live is not the end of the
ERP implementation journey.
Post go-live, organizations must
continue to monitor and optimize
the system, address any issues
or challenges that may arise, and
continuously train and support
end users to ensure smooth and
efficient utilization of the ERP
system.
Post implementation support
is normally provided by the
Vendor partner. It is a critical
phase in ERP implementation
that involves providing ongoing
support and maintenance to
the ERP system after go-live.
It includes activities such as
user support and training,
monitoring system performance,
addressing system issues, and
maintaining communication
with the ERP vendor or
implementation partner. Proper
post implementation support is
essential to ensure the smooth
and efficient operation of the
ERP system, address any issues
or challenges that may arise,
and maximize the system’s
functionalities to achieve the
organization’s desired outcomes.

Author may be reached at
kapilswk@gmail.com and
eboard@icai.in
NOVEMBER 2023 55
 601

THE CHARTERED ACCOUNTANT

CORPORATE GOVERNANCE

Earning Quality & Corporate

Governance Disclosure: A Study of
the Indian Real Estate Sector
percentage of independent
directors and the absolute
discretionary accruals, and
the quality of earnings.
Our findings also indicate
that the audit committee’s
meetings and competence
have an impact on the
earnings quality. However,
the quality of earnings is
unaffected by institutional
Dr. Smita Tripathi Dr. Abhishek Kumar Singh ownership. This suggests
Academician Academician that only companies
with the best corporate
Using a sample of the Indian real estate firms traded on governance see the quality
the NSE, this article analyses the correlation between of their earnings improve.
corporate governance and earnings quality. The percentage This research lays the
of independent directors, audit committee expertise, audit groundwork for investors
committee meeting frequency, and institutional ownership were to examine GCG quality,
used as indicators of Good Corporate Governance (GCG). We a key factor in determining
find substantial evidence of a negative correlation between the earnings quality.

Introduction information. Companies with about the state of the company

F
inancial data cannot fully
capture all changes in a
company’s operational
activity. Therefore, companies
should give more thought
as to how they handle the
management of non-financial
information shared with third
parties. Complementary data and
additional reporting methods,
such as the application of
corporate governance (CG),
are included in non-financial
information (Istianingsih,
2021). The annual reports of
the corporations that trade
their shares on the Indian
Stock Exchange contain this
stock market listings are required
to include information about their
operations in their annual reports.
Due to the public nature of
financial statements, company’s
actors such as the management
or financial accountants may
feel pressure to fabricate reports
indicating a strong and firm
performance, even if the reality is
less than stellar.
According to the agency
hypothesis, the manager, who
acts as an agent, and the
principal, who is the owner, have
different levels of information.
The management should give
the investors accurate reports
because they know more than
the investors about a company’s
internal situation and future
business possibilities. However,
the information could not
accurately reflect the company’s
true state. This results from
conflicting interests between the
agent and the principal (Scott,
2015). Due to this clash of
interests, the financial statements
may show asymmetrical or
missing information, which
can be deceptive. Asymmetry
in information can lower the
standard of wages. Studies
(Penman and Zhang, 2002;
Istianingsih, 2021) have proven
a favorable association between

www.icai.org NOVEMBER 2023 57

602
CORPORATE GOVERNANCE
sound corporate governance
and earning quality using various
metrics of information asymmetry.
There is conflicting data in the
corporate governance literature.
This study examines the
connection between corporate
governance and the NSE-listed
companies’ earnings quality.
Since the real estate industry
is one of the most well-known
industries in the world from
an investing perspective, we
decided to focus on the Indian
real estate market. In India, the
real estate industry is regarded
as the foundation of the country’s
economy. The Indian real estate
market was valued at $200 billion
in 2021 and is anticipated to
reach $1 trillion in 2030 (Real
Estate Industry Report, 2022).
Given its significance, this study
examines how earning quality
affects real estate enterprises’
corporate governance. The
strength of this study consists
in highlighting the significance
of Good Corporate Governance
(GCG), which is used as a
foundation for investors in public
enterprises in India.
Literature Review
Managers may put their own
interests ahead of those of the
shareholders if there is a gap
between the management and
ownership. Agency theory, as
explained by Scott (2015), clarifies
the nature of the principal-
agent contractual relationship.
A manager’s job as an agent
is to increase the principal’s
profit as much as possible, for
which the manager will receive
compensation in accordance
with the terms of the agreement
between the two parties. A
shareholder-manager information
gap also contributes to the
agency problem. The literature
generally suggests that there is
connection between corporate
58 NOVEMBER 2023
governance and reported
earnings.
Good governance procedures
may improve the quality of
accounting information, and
this is a positive relationship to
uncover. Financial accounting
may be of assistance in enforcing
managers to act in the best
interests of investors through the
employment of corporate control
systems (Bushman and Smith,
2001). Financial reporting and
transparency are, in fact, regarded
as critical cogs in the corporate
governance wheel. Increasing
the efficiency of corporate
governance and debt agreement
monitoring is the quality of
earnings in financial accounting
information.
The need for high-quality
accounting data stems from the
need to better track performance
and increase the value of the
company to its shareholders. In
addition, good disclosure lessens
the gap in the knowledge that
exists between managers and
shareholders. The work of the
audit committee is crucial in
this respect; the committee is
responsible for overseeing the
financial reporting process and
communicating with external
auditors on the investors’ behalf
(Ball et al., 2001). The U.S.
Sarbanes-Oxley Act stipulates
that communication between
the audit committee, the board
of directors, and management
is crucial to ensure the integrity
of financial statements and
the efficacy of other corporate
governance systems (Penman
and Zhang, 2002). Quality
of earnings and corporate
governance was found to be
inversely related by Ferreria et
al. (2007). Additional evidence
linking corporate governance
mechanisms and stock price
transparency was provided by
Ferreria et al., (2007). When
accounting information is of low
THE CHARTERED ACCOUNTANT
quality, businesses, according
to Bushman and Smith (2001),
end up using more expensive
performance measures. Similar
reasoning could lead one to the
conclusion that companies with
higher-quality earnings invest
less money in pricey corporate
governance measures. Cox (1985)
revealed a positive correlation
between voluntary disclosures
and the quality of results, with
larger earnings fluctuation for
non-disclosing enterprises.
The majority of past research
has looked at how GCG affects
company worth. However, we
think about the missing link
to see the immediate impact
of GCG implementation on
earnings quality. The primary
goal of implementing GCG is to
lessen agency issues, particularly
information asymmetry. Therefore,
GCG can be considered as
having an effect on the value of
the company both immediately
and indirectly through the quality
of earnings. Reducing earnings
management and improving
financial report quality requires
the widespread adoption of GCG.
Unlike Istianingsih (2021), which
used data from Indonesian firms
to investigate the role of earnings
quality as a mediator of the
connection between GCG and
business value, the focus here
is on India. Thus, this paper’s
central argument is that GCG has
a direct impact on the earning
quality of the companies.
Research Methodology
All the sampled companies are
real estate companies listed
on the NSE. The research
observation period is from 2016 to
2021. Only those companies were
selected that published annual
and audited financial reports
during the research year. Data is
collected from the annual reports
of the 36 companies available
on their official website for the
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 603

THE CHARTERED ACCOUNTANT

CORPORATE GOVERNANCE
period of 5 (2016-2021) years. Table 1: Descriptive Statistics of the Data Set
McNichols (2002) modification of
Dechow and Dichev (2002) model Particulars Mean Standard deviations
has been used to measure the Earning quality 0.053 .042
earning quality of the sample real
ACM 2 .99
estate firms. The earning quality
measures include both lead ACE 5.25 .6756
and lag cash flow term, hence IO .731 .161
equation (1) below was estimated ID .401 .081
for each firm using data from
2016-17 to 2020-21. Source: - own construction on the basis of analysis of data

Equation 1 The impact of the corporate independent directors has an

TCAj.t/Assetsj.t = α0.j + α1.j CFOj.t-1/
Assetsj.t + α2.j CFOj.t/Assetsj.t +
α3.jCFOj.t-+1/Assetsj.t + α4.j Change
in Revj.t/ Assetsj.t + α5.j PPe.j.t/
Assetsj.t + vj.t……(1) where
TCAj.t = total current earnings
in the year t (CA-CL-Cashj.t-
STDEBTj.t)
Assetsj.t = Firms average total
assets in the year t and t-1
CF = Cash Flow from operations
in year t
Rev = Change in revenue
between year t -1 and t
PPEj.t = Firm’s gross fixed asset
(property) in the year t
The GCG was measured based
on four factors: the number of
independent directors (ID), the
number of audit committee
meetings (ACM), the expertise
of the audit committee, and
institutional ownership (IO) as
proposed by Istianingsih (2021).
It is envisaged that GCG (ID,
ACM, ACE, and IO) will boost
earnings quality by adhering
to the values of openness,
ownership, autonomy, fairness,
and traceability.
Results: The quality of a
company’s earnings can be
gauged in part by looking at its
corporate governance. Table 1
shows some summary statistics
about the data set.
governance system on
business earnings quality was
analyzed using regression
analysis (Table 2). With an R
Squared value of 0.361, we
find that effective corporate
governance mechanisms
including independent directors
(ID), institutional ownership (IO),
frequency of audit committee
meetings (ACM), and audit
committee expertise (ACE) can
explain 36.1% of the differences
in earnings quality. The F-value
was 0.001 (less than .05),
indicating a good fit to the data.
ID has a regression coefficient
of 0.192, which means that a
one percentage point rise in
ID is associated with a 0.192
increase in earnings quality. A
minus sign denotes a positive
correlation between ID and
earning quality. This is because
the metric of earning quality is
inversely proportional to that
of accrual quality. The p-value
for significance is 0.046%. This
means that the proportion of
Table 2: Result of Multivariate Regression
Adjusted R2 = 0.361
F value = 4.258, p value = .001
Particulars Coefficient
ID − 0.192
IO 0.035
ACM −0.052
ACE −.0480
effect on the quality of earnings.
Since the IO coefficient is just
0.035 and the significance
value is more than .05, the
institutional ownership has no
statistically meaningful impact
on the quality of earnings. The
audit committee meeting (ACM)
frequency significantly affects
earnings quality (ACM coefficients
0.052). The coefficient of ACE
is negative 0.009, which means
that for every one percentage
point an ACE rises, discretionary
accrual falls by 0.009. In light of
this, the quality of earnings is
profoundly impacted by the audit
committee’s level of knowledge.
Discussion
According to the research, the
earnings quality of NSE-listed real
estate companies was affected
by the number of independent
directors. This is because
the presence of independent
directors’ boosts management’s
autonomy and gives the board
of directors more leeway to do
its job if independent directors
Significance value
.046*
.087
.029*
.002*

www.icai.org NOVEMBER 2023 59

604
CORPORATE GOVERNANCE
make up a majority of the board.
The research by Al-Absy and
Ntim (2020), on the other hand,
indicated that the number of
independent directors’ had no
bearing on the quality of earnings.
According to Al-Absy and Ntim
(2020), independent directors
are mostly just a formality for
companies to meet legislative
obligations, while the majority
shareholder still plays an essential
role.
The earnings quality of real
estate enterprises was found
to be unaffected by institutional
ownership in a regression
analysis. This finding is in line
with findings from study by
Istianingsih (2021) who concludes
that institutional ownership has
no influence on earnings quality.
Kwong et al. (2020) found that the
quality of earnings was affected
by institutional ownership, but
our analysis does not corroborate
that finding. The consistency with
which the audit committee met
has an effect on the reliability
of real estate firms’ financial
reports. This finding contradicts
the findings of Hajawiyah et
al. (2020), who found that the
presence of an audit committee
does not ensure that it will be
able to effectively review financial
reports for mistakes regardless
of how often its members
meet. The findings of this study
corroborate those of Kwong et
al. (2020), and Istianingsih (2021),
who found that the number of
times an audit committee meets
has an effect on the quality of
the company’s profitability. The
purpose of the audit committee’s
regular meetings is to ensure the
quality of the company’s earnings,
but they are also held to satisfy
the requirements of the SEBI,
which mandates that the audit
committee hold regular meetings.
Companies’ earnings quality
was also impacted by the audit
committee’s level of expertise.
The findings contradict those
60 NOVEMBER 2023
of Hajawiyah et al. (2020), who
found that the level of education
of audit committee members
had no bearing on the quality of
earnings. Members of the audit
committee with an accounting
background are better equipped
to apply accounting standards
and participate actively in
controlling and supervising to
enhance the quality of earnings.
Conclusion, limitations, and
scope for future research
These findings are derived from
the analysis of the data. The
quality of earnings is influenced
by the number of independent
directors. An improvement in
earnings quality can be achieved
by increasing the number of audit
committee meetings held each
year. The quality of earnings is
affected by the audit committee’s
expertise. Stakeholders, and
notable investors, might utilize
the findings of this study to justify
the adoption of GCG to rein in
management and cut down on
agency costs. Investors may
find this study’s findings helpful
in evaluating the company’s
success. Investors can gauge
their return on investment by
analyzing the degree to which
GCG is being implemented and
the credibility of the company’s
declared results. However, the
findings of the study cannot
be generalized because the
sample size is small and limited
to real estate companies only.
Researchers interested in the
effect of the GCG on income
quality are likely to consult the
study’s findings. Real earnings
management models can be
used to quantify the intervention
variables in future studies.
Increase the sample size,
lengthen the time period, and
incorporate other variables that
affect earnings quality and firm
success in future studies of the
Indian stock market.
THE CHARTERED ACCOUNTANT
References
● Al-Absy, M. S., & Ntim, C. G. (2020).
The board chairman’s characteristics
and financial stability of Malaysian-
listed firms. Cogent Business &
Management, 7(1), 1
● Ball, R., Kothari, S. & Robin, A.,
(2001). The effect of international
institutional factors on properties
of accounting earnings. Journal of
Accounting and Economics, 29,
1-51
● Bushman, R and Smith, A. (2001).
Financial Accounting Information
and Corporate Governance. Journal
of Accounting and Economics, 32(2),
237-334
● Cox, C.T. (1985). Further evidence
on the representativeness of
management earnings forecasts.
The Accounting Review, 60(4): 692-
701
● Dechow, P.M. & Dichev, I.D. (2002).
The quality of accruals and earnings:
the role of accrual estimation errors.
The Accounting Review, 60(4): 692-
701
● Ferreria, Paul A. & Laux (2007).
Corporate Governance. Idosynteric
Risk & Information Symmetry.
Journal of Finance, 1
● Hajawiyah, A., Wahyudin, A.,
Kiswanto, S., & Pahala, I. (2020). The
effect of good corporate governance
mechanisms on accounting
conservatism with leverage as
a moderating variable. Cogent
Business & Management, 7(1), 1–12
● Istianingsih (2021). Earnings Quality
as a link between Corporate
Governance Implementation and
Firm Performance. International
Journal of Management Science and
Engineering Management, 16:4, 290-
301
● Kwong, G. W., Mohamad, S., &
Keong, O. C. (2020). Corporate
governance and earnings
management: Evidence from listed
Malaysian firms. International
Journal of Psychosocial
Rehabilitation, 24(4)
● McNichols, M.F. (2002). Discussion
of Quality of Accruals and
economics. The Accounting Review,
77(1)

Authors may be reached at
tripsmit@gmail.com,
abhishekbhu008@gmail.com and
eboard@icai.in
www.icai.org
606

AUDIT THE CHARTERED ACCOUNTANT

How to deal with misstatements

identified during the Audit
CA. Nilanjan Paul
Member of the Institute
Identifying and dealing with misstatements identified during
the audit is a critical step when forming an audit opinion on the
entity’s financial statements. Misstatement occurs when there
is a difference between the aspects reported in the financial
statements and how these aspects should be reported as per
the applicable financial reporting framework. Misstatements
can occur due to a variety of reasons e.g., inaccuracy
in gathering data or may also result from fraud, such as
manipulation or alteration of accounting records. Normally,
misstatements are corrected by the management, unless
they are clearly trivial. In case of uncorrected misstatements,
the auditor should accumulate the misstatements, evaluate
them, and assess their impact on the audit opinion.

S
tandard on Auditing
(SA) 450, “Evaluation of
Misstatements Identified
during the Audit,” provides
the auditor’s responsibility
while evaluating the effect of
uncorrected misstatements. This
article provides an overview of
the key aspects that should be
considered by the auditor while
evaluating the misstatements
and consequential implications
on the audit opinion.
Determining the nature
and cause of identified
misstatements
When a misstatement is
identified, the auditor should
determine its nature and cause
before deciding it as insignificant
or before expanding the audit
procedures. Knowing the cause
would help the auditor to obtain
deeper insight including potential
for additional misstatements
and the need to revise the audit
strategy. While determining
the nature and cause of a
misstatement, due emphasis
should be given to quantitative
and qualitative aspects of the
misstatement including whether
the misstatement results from
an error or potentially indicates
fraud. The discovery of fraud
in an audit requires a broader
consideration of possible
implications as compared to
the discovery of a misstatement
due to a misunderstanding
of facts. Simultaneously, the
auditor should assess the
effect of misstatements on
the performance materiality,
underlying audit risk, and
substantive procedures.
Once all the misstatements have
been accumulated, the auditor
should evaluate their materiality
to the financial statements, both
individually and in the aggregate.
These evaluations can be
complex and might require
exercise of significant judgement
and professional scepticism.
Accordingly, senior members
of the audit team should be
involved while performing these
evaluations.
Considering turn
around effect/recurring
misstatements
Auditors should properly
address the effects of carryover
misstatements made in a
prior period when evaluating
audit findings in a later period.
The measurement of errors
in the current-period financial
statements is dependent on
the auditors’ examination of the
probability that the prior-period
errors may have material impact
on the current-period financial
statements.
Additionally, the auditor should
critically assess the reasons for
those misstatements occurring
in the current period that also
occurred in the prior period e.g.,
reasons as to why management
did not correct the inappropriate
accounting treatment or introduce
new processes or controls to

62 NOVEMBER 2023 www.icai.org


THE CHARTERED ACCOUNTANT
When a
misstatement is
identified, the auditor
should determine
its nature and cause
before deciding it as
insignificant or before
expanding the audit
procedures.
prevent the misstatements from
recurring, or if the management
did, why these controls are
ineffective. Recurrence of
misstatement is an important
consideration while assessing the
qualitative aspect of misstatement
and should be looked at very
closely by the auditor.
Determining material
misstatements –
Quantitative and qualitative
considerations
Assessment of misstatement –
as material or immaterial is a
significant judgement area.
Both quantitative and qualitative
aspects are relevant for this
assessment. The auditor
should begin the evaluation of
uncorrected misstatements by
considering the amount of those
misstatements in relation to the
materiality level of the entity’s
financial statements.
The auditor would generally
evaluate the uncorrected
misstatements against the
measure used to determine
materiality (e.g., profit before
tax), since such measure is
important to the users of the
financial statements. Evaluation
of uncorrected misstatements
against profit before tax can
still be relevant- even when a
different benchmark is used
for determining materiality.
This is because it is generally
recognized that profit before
www.icai.org
tax is the measure of greatest
significance to the users of the
financial statements. The auditor
should consider the effect of
uncorrected misstatements, both
individually and in aggregate.
Quantitative considerations
include:
� The magnitude of the
misstatements in relation to
the materiality.
� The relative size and nature of
uncorrected misstatements
in relation to individual line
items, subtotals, and totals
in the context of the financial
statements as a whole.
� The effect of uncorrected
misstatements related to the
prior period.
� An estimate for undetected
misstatements.
Quantitative factors on their own
are generally insufficient in the
assessment of materiality. The
nature of the item and other facts
and circumstances must also
be assessed. Given the unique
facts and circumstances of each
situation, both qualitative and
quantitative factors as well as the
use of judgment are necessary.
Hence, misstatements of relatively
small amounts that come to the
auditor’s attention could have a
material effect on the financial
statements. The auditor should
use professional judgment when
evaluating the misstatements,
in light of the qualitative factors,
to determine what should be
considered material. The auditor
would need to consider the entity’s
specific facts and circumstances.
Qualitative considerations
include:
� Significance of the element of
financial statements affected
by the misstatement.
� Sensitivity of the
circumstances surrounding
the misstatement.
607
AUDIT
� Potential effect of the
misstatement can change net
profit to a loss or vice versa.
� Affects compliance with
debt covenants or other
contractual requirements.
� Effects increasing
compensation of key
managerial personnel.
� Affects key ratios monitored
by key users of the financial
statements.
Let’s understand the quantitative
and qualitative considerations
using the following examples:
Example – Misstatement in
Profit and Loss account
An auditor identifies
understatement in the raw
material consumption and trade
payable due to purchasing/
receipt cut-off issues and also
identifies the understatement
of purchase of traded goods
and trade payable due to a
miscalculation.
Even though, each error was
individually determined to be
immaterial, the auditor considers
the combined effect of these
errors to be material since the
combined effect:
� Results in misstatement of
10% of the total expenses.
� Pertains to related financial
statements line items.
� Relates to related party
transactions.
Example – Misstatement in
Balance sheet
Advances to vendors
amounting to ₹1,00,000 was
not adjusted with trade payable
as at year end. Materiality is
₹90,000. Auditor concluded
that the misstatement does
not merit the attention of those
charged with governance – and
hence do not have a material
effect because:
NOVEMBER 2023 63
608
AUDIT
� The period-end advance
to vendor balance is ₹20
lakhs and the trade payable
balance is ₹15 lakhs.
Therefore, the auditor
does not believe that the
misstatement of ₹1,00,000
would affect the economic
decisions of users of the
financial statements.
� The amount would not
influence the decisions
of those charged with
governance about the
effectiveness of controls
with reference to financial
statements or the accuracy
of the financial statements.
� The amount is not material to
the line items, sub-totals, and
totals.
� It does not affect the other
qualitative factors e.g., key
ratios.
Example – Misstatement in the
statement of cash flows
A newly incorporated private
company’s statement of cash
flows shows:
� Cash inflow from operating
activity – ₹5,100.
� Cash outflow from investing
activity – ₹3,000.
� Cash inflow from financing
activity – ₹400.
A misstatement of ₹250 arises
from the incorrect presentation
of payments for capital items–
(investing activity) as payment
to suppliers of raw materials
(operating activity). The
misstatement is in relation to
cash inflows/outflows from the
operating and investing activity
(5% and 8% respectively).
Auditor concludes that the
misstatement is material in
the context of the financial
statements as a whole:
� Being a newly incorporated
company, users of the
financial statements are more
interested in the accurate
64 NOVEMBER 2023
classification of cash flows
instead of the net profit/ loss
for the year.
� Involves related parties.
� Affect the company’s
compliance with debt
covenants.
Misstatements in
disclosures/classifications
Misstatement is not a recognition
and measurement issue alone.
Misstatements can occur in
disclosures as well. Prior to
concluding that the omitted
disclosure is immaterial, the
auditor should consider both
qualitative and quantitative
factors (as discussed above)
and assess whether the omitted
disclosure, either individually
or when aggregated with other
misstatements in disclosures,
reasonably affects the true and fair
view of the financial statements.
Example – Misstatement in
disclosures
A misstatement in revenue
and profit of a relatively small
segment (that is represented by
management to be important
to the future profitability of
the entity) is more likely to be
material to investors than a
misstatement in other segments.
Auditor can conclude that the
matter relating to segment
information is qualitatively
material even though, in his
judgment, it is quantitatively
immaterial to the financial
statements taken as a whole.
Reclassification misstatements
can occur when an amount has
been classified incorrectly in the
balance sheet, profit and loss
account, or statement of cash
flows. Although reclassification
misstatements do not affect
net profit, they may still have a
material effect on the financial
statements as they may mislead
users of the financial statements.
THE CHARTERED ACCOUNTANT
Determining the materiality of
reclassification misstatements
is a different ball game than
determining the materiality of
misstatements affecting profit
for the year. Sometimes, auditor
may decide that a reclassification
misstatement is not material to
the financial statements as a
whole, even though it exceeds
the materiality level applied in
evaluating other misstatements.
Example – Reclassification
misstatement
The auditor identified
inappropriate classification of ₹4
crore between current and non-
current borrowings of an NBFC.
The amount of misstatement
exceeds materiality threshold.
The auditor can conclude that:
� Quantitatively a balance
sheet reclassification
misstatement of ₹4 crore is
not material to an entity with
total assets of ₹500 crores
(i.e., 1% of the total assets).
� The users of the financial
statements would not
consider ₹4 crore to be a
material amount.
� This reclassification
misstatement does not
merit the attention of those
charged with governance.
Assess pervasiveness of
misstatements
Pervasiveness is a matter
that requires professional
judgment. In a nutshell – this
is a judgment as to whether
the misstatement is isolated
to specific components of the
financial statements, or whether
the matter is widespread
or observed throughout the
financial statements, thereby
rendering the financial
statements unreliable as a whole.
Misstatement is considered
pervasive when:
� The misstatement affects
multiple items in the
www.icai.org

THE CHARTERED ACCOUNTANT
financial statements and
is not confined to specific
components, accounts,
or items of the financial
statements.
� Misstatements can be
pervasive if the effect is
confined to specific items
of financial statements and
represents a substantial
portion of the financial
statements.
� Where it pertains to
disclosures, pervasive
misstatements are such
disclosures or matter(s) that
are fundamental to the user’s
understanding of the financial
statements.
Example – Multiple captions
affected
Where an auditor detects a bias
in the valuation of estimates
on the assets side of a balance
sheet (such as increasing the
useful lives of tangible assets
without justification, not treating
impairment in investments as
other than temporary, treating
doubtful receivables as good,
not providing adequately for
inventory obsolescence, etc.) all
building up to an overstatement
of earnings, the aggregate effect
of which, may be material to
the financial statements taken
as a whole, then the possible
misstatement is said to be
pervasive.
Example – Confined to specific
item of financial statements
When the misstatement is only
in valuing inventory of a major
raw material at cost instead of
at net realisable value and when
clear evidence is available that
the net realisable value of the raw
material was substantially lower
than the cost and the selling price
of the finished product is pegged
to the current raw material prices,
and the difference in valuation, if
booked, could wipe out 80% of
www.icai.org
the profit before tax of the entity,
the misstatement is said to be
pervasive.
Example – Non-disclosure of
key events
Where an entity is unable to
resolve to the satisfaction of
the auditor, a going concern
issue in relation to one of its
major subsidiaries, in which
the entity has a substantial
exposure in terms of equity, debt,
and guarantee commitments,
and it refuses to either make
a provision or a satisfactory
disclosure of the matter - the
misstatement is said to be
pervasive.
Framing modified audit
opinion
The auditor should evaluate the
situation carefully before making
judgment as to the nature of
modification required in audit
opinion. It is very important
that the auditor documents in
the work papers, how and why
he reached this professional
judgment. There can be two
situations:
� First, the auditor has
obtained sufficient
appropriate audit evidence
to conclude that the financial
statements are materially
misstated.
� Second, the auditor is
unable to obtain sufficient
appropriate audit evidence
to conclude whether the
financial statements are
materially misstated.
In either case, the audit opinion
will be modified, but the nature
of modification can be different.
If the auditor concludes that the
possible effect of misstatements
is likely to be material and not
pervasive - a qualified opinion
would suffice.
If the misstatement is both
material and pervasive - then
609
AUDIT
a qualified opinion would not
be sufficient, and an adverse
opinion should be given.
A disclaimer of opinion is given
when the auditor is unable to
obtain sufficient appropriate
audit evidence on which to
base the opinion, and the
auditor concludes that the
possible effects of undetected
misstatements, if any, could be
both material and pervasive to
the financial statements.
In a nutshell
The governing principles
suggests an assessment,
whether a misstatement is
material or not, requires that one
views the facts in the context of
the surrounding circumstances,
or the total mix of information.
While the total mix of information
includes the size in numerical
or percentage terms of the
misstatement, it also includes
the qualitative factors in which
the user of financial statements
would view the financial
statements item.
The auditor should apply
professional judgment,
considering the quantitative and
qualitative factors to determine
whether a misstatement
is material and merits the
attention of those charged with
governance. If each individual
error is not material on a
standalone basis, the auditor
should combine the effect of all
errors, including the effect of
prior period errors reversing in
the current period, and determine
whether the aggregate effect
is material to the financial
statements.

Author may be reached at
paulnilanjan@hotmail.com and
eboard@icai.in
NOVEMBER 2023 65
 611

THE CHARTERED ACCOUNTANT

PUBLIC FINANCE

Transition to Accrual Accounting:

Models and learnings for Urban
Local Bodies
under increasing pressure
to achieve financial self-
sufficiency. They are
expected to augment
their own-source revenue
streams while also raising
funds from open markets
through mechanisms
such as municipal bonds.
However, for municipalities
CA. (Dr.) R S Murali CA. Ashok Rao
to issue bonds, they
Member of the Institute Member of the Institute
need to establish their
The financial challenges faced by Indian municipalities and creditworthiness, which is
their subsequent impact on municipal governance have contingent upon obtaining
been widely discussed. The root cause of the weak financial a credit rating. This, in
position primarily stems from two factors: inadequate turn, necessitates reliable
own-source revenues of municipalities and poor fiscal and accurate financial
management, with the latter often exacerbating the former. statements.
As urban populations continue to surge, municipalities are

T
he quality of financial
information available
to decision-makers
plays a pivotal role in shaping
fiscal management policies.
Accurate financial information
hinges on the reliability of the
underlying accounting system.
Across the globe, governments
are transitioning from the
traditional “cash” accounting
system to the more effective
“accrual” accounting system.
The accrual system ensures the
completeness and accuracy of
financial reporting. It is projected
that by 2025, over 50% of
jurisdictions worldwide will report
on an accrual basis. In India, this
shift has been acknowledged
by successive Central Finance
Commissions (CFCs), beginning
with the twelfth, which
emphasized the adoption of
accrual accounting in government
practices.
The journey towards
implementing the accrual
accounting system in India
commenced with urban local
bodies (ULBs). The Comptroller
and Auditor General, in a
report dating back to 2002,
recommended the adoption of
accrual accounting. However,
even after two decades, a
substantial number of ULBs
in the country continue to
maintain their accounts on
a cash basis. In a bid to
accelerate the adoption of
accrual accounting, the Ministry
of Housing and Urban Affairs
(MoHUA), Government of India,
heeding the recommendations
of the 15th CFC, made audited
annual accounts a prerequisite
for accessing basic grants.
These audited annual accounts
encompass the Balance Sheet,
Income and Expenditure
Statement, and Cash Flow
Statement, all of which
necessitate accrual accounting.
This policy shift has prompted
State governments to encourage
ULBs to prepare financial

www.icai.org NOVEMBER 2023 67

612
PUBLIC FINANCE
The journey towards
implementing the
accrual accounting
system in India
commenced with urban
local bodies (ULBs).
statements and undergo audits.
Nevertheless, the experiences
of States that have attempted
the transition to accrual
accounting in ULBs reveal that
these reforms are intricate and
carry a significant risk of failure
if not executed meticulously.
While a few States, including
Karnataka, Kerala, and Tamil
Nadu, have effectively embraced
the change, many others are still
in the process of transitioning. In
certain instances, the situation
has regressed following an
initial implementation. Overall,
successful adoption of the
accrual system has been limited
to a few ULBs within most
States.
The study
Irrespective of the outcomes
of these transition efforts,
States that have taken the lead
68 NOVEMBER 2023
in adopting accrual-based
accounting have accumulated
valuable experiences that
can serve as valuable lessons
for other States currently
embarking on similar reforms.
However, the existing literature
on this subject is limited and
outdated, necessitating the
development of a knowledge
repository to capture reform
insights. To address this gap,
a study commissioned by NITI
Aayog was conducted by the
ICAI (through the Committee
on Public & Government
Financial Management) and
ICAI Accounting Research
Foundation. This study aimed
to document the reform
journeys of select States,
distill key learnings, and
provided recommendations for
more effective future reform
endeavours.
The study spanned five months,
from November 2021 to March
2022, and focused on States
including Odisha, Rajasthan,
Tamil Nadu, and Cantonment
Boards. These States were
chosen based on demographic,
geographical, and urbanization
factors, as well as their progress
in implementing municipal
finance reforms. The research
THE CHARTERED ACCOUNTANT
involved interviews using a
comprehensive questionnaire
covering various dimensions of
accrual accounting transition,
such as reform planning, policy
framework, technological
solutions, implementation
strategies, human resources,
training, and financial
statements. In addition to the
in-depth study of selected
States, desk-based research
was conducted on experiences
in other Indian States and
internationally.
The draft report was shared with
the study States for feedback
and was further discussed at a
consultative workshop in May
2022. This workshop brought
together representatives from
NITI Aayog, ICAI, Ministry of
Housing and Urban Affairs,
Government of India, the
Comptroller and Auditor
General of India, and Urban
Development Departments of
select States. The feedback
collected during these
interactions was incorporated
into the final report.
The final study report was
released in January, 2023.
The report
The study report is structured
into four chapters. Initial
chapter lays the groundwork by
contextualizing the study and
highlighting the importance of
sound financial management for
effective municipal governance.
It provides an overview of
the historical evolution of
municipal financial reforms
in India, outlines the study’s
objectives, methodology, and
inherent limitations. Importantly,
the study is not confined to
technical aspects of accrual
accounting but also emphasizes
the importance of effective
implementation.
www.icai.org

THE CHARTERED ACCOUNTANT
Thereafter, the study delves into
the transition experiences of
the selected States, offering a
detailed account of their reform
journeys including summaries
of reforms in each State, case
studies of specific ULBs, and
a tabular presentation of key
transition highlights across
all study States. Moreover, it
touches upon the transition
experiences of other States
beyond the study’s focus.
Cross-cutting developments
with relevance to accrual
accounting reforms, such as
the role of Central Finance
Commissions and State Finance
Commissions, the National
Urban Digital Mission, and
initiatives by various entities, are
also discussed.
Thereafter, the study covered
lessons from the experiences
of States engaged in municipal
financial reforms. It provides
recommendations structured
around policy, process, people,
and technology dimensions.
These recommendations
encompass reform design and
planning, reform implementation
strategies, resource allocation
and capacity-building,
and technology solution
implementation. Two valuable
www.icai.org
checklists—one at the State
level and another at the ULB
level—are introduced, focusing
on key success factors for
a seamless implementation
process, culminating in
proposing an indicative
18-month timeline for the
transition, complete with key
milestones.
Lastly, the study transcends
the immediate outcomes of
accrual accounting—namely, the
production of audited financial
statements—and underscores
the broader significance of
municipal financial reforms. It
posits that the ultimate goal
of these reforms is to enhance
municipal governance. This
argument is supported by
anecdotes and evidence from
international cases in seven
countries. It outlines a vision for
a finance-integrated municipal
e-Governance system and
outlines a path forward for
municipal finance reforms in
India.
Findings: Concerns of
reality
Key findings from the study
underscore a concerning reality:
aside from a few exceptions
613
PUBLIC FINANCE
Technology-related
recommendations
underscore the
importance of adopting a
"digital first" approach,
integrating technology
within a municipal
e-Governance
framework.
such as Karnataka, Tamil Nadu,
and select Cantonment Boards,
most study States have not
fully transitioned to accrual
accounting in ULBs. This
trend is mirrored in the desk-
based research across other
States, with Kerala standing
as a noteworthy exception.
The report identifies two major
roadblocks: lack of capacities at
the ULB level and the absence
of integration between financial
statement audits and statutory
audits. To ensure sustainable
change, these challenges need
to be addressed promptly, as
mere incentives and grants
may not lead to enduring
transformation.
The report proffers a series of
recommendations to structure
municipal accounting reform
initiatives. In the realm of policy,
the report underscores the
effectiveness of State-wide
implementation, the importance
of a collaborative approach
involving various departments,
and the role of specialized State
institutions. The process-related
recommendations advocate
for informed implementation
based on past experiences,
decentralized management,
clear mandates, and a mix of
incentives and disincentives.
The significance of integrating
financial statement audits into
external audits is emphasized,
along with the imperative of a
NOVEMBER 2023 69
614
PUBLIC FINANCE
complete transition away from
legacy systems.
In terms of resourcing
and capacities, the report
recognizes the technical nature
of accounting and suggests
engaging external expertise
for project management
and assistance. It stresses
the need for a balance
between external and internal
expertise to ensure long-term
sustainability. Building in-house
capabilities is crucial, requiring
adjustments to municipal cadre
and service rules. Continuous
support arrangements post-
implementation are also
highlighted.
Technology-related
recommendations underscore
the importance of adopting
a “digital first” approach,
integrating technology within
a municipal e-Governance
framework. However, the
report cautions against viewing
technology as a panacea,
emphasizing that it should
complement rather than
substitute accounting practices.
Road ahead
Moving beyond the immediate
outputs of accrual accounting,
the study posits that the true
measure of success lies in
the improvement of municipal
governance. Audited financial
70 NOVEMBER 2023
statements are not an end in
themselves; they are a means
to enhance accountability,
fiscal responsibility, budget
management, and risk
management. Moreover, they
enable efficient resource
allocation and facilitate
service delivery costing. When
combined with non-financial
parameters, financial indicators
serve as effective tools for
performance management
at both the ULB and State
levels. This argument has been
reinforced with examples from
seven countries, demonstrating
how accrual accounting has
been leveraged to achieve
better governance outcomes. It
envisions a finance-integrated
municipal e-Governance
system as the cornerstone of
successful municipal finance
reforms. The study culminates
in proposing a holistic approach
for municipal financial reforms
in India. This approach is
marked by outcome-driven
design, data-centricity, process
reengineering, stakeholder
engagement, capacity-building,
transparency, and accountability
considerations. Additionally,
it underscores the growing
relevance of environmental,
social, and governance (ESG)
considerations in the reform
landscape.
THE CHARTERED ACCOUNTANT
When combined
with non-
financial parameters,
financial indicators
serve as effective
tools for performance
management at both
the ULB and State
levels.
In conclusion, the study sheds
light on the critical issue of
weak financial positions of
Indian municipalities and
its implications for effective
governance. It highlights the
importance of adopting the
accrual accounting system and
documents the reform journeys
of select States. The study
distills essential lessons and
presents a comprehensive set
of recommendations for more
effective future reform initiatives.
It underscores that the ultimate
goal of these reforms is to
enhance municipal governance
and outlines a pathway toward
achieving this goal. As India
continues to undergo rapid
urbanization, the findings and
insights from this study can
play a pivotal role in shaping the
future trajectory of municipal
finance reforms, ultimately
leading to more efficient and
effective municipal governance.
The complete study is available
at https://resource.cdn.icai.
org/72746cpfgm58672.pdf and
https://www.niti.gov.in/sites/
default/files/2023-03/Transition-
toAccrualAccounting.pdf.

Authors may be reached at
eboard@icai.in
www.icai.org
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ECONOMIES.

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616
SUSTAINABILITY
EU Carbon Tax and its Impact on
the Indian Industry
CA. Manas Chugh
Member of the Institute
Carbon Border Adjustment
Mechanism (CBAM)
The European Union
(EU) implemented the
Carbon Border Adjustment
Mechanism (CBAM) on
EU - ETS System
T
he EU-ETS system is the
world’s first international
emissions trading system,
which is running in its fourth
phase starting from 2021 to 2030.
It’s a ‘Cap and Trade’ policy
mechanism, where a cap or limit
is set on the amount of polluting
gases that can be emitted by
the firms covered by this policy.
This limit undergoes periodic
reductions to force polluters to
adopt sustainable and innovative
approaches towards reducing
greenhouse gas emissions.
The factory/ manufacturing
entities have the option to
1
https://europeanclimate.org/stories/the-fit-for-55-package-at-a-glance/#:~:text=Released%20in%20two%20batches%20
in,2030%20compared%20with%201990%20levels.
72 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
April 18, 2023, with the primary aim of addressing "Carbon
Leakage." CBAM is a regulatory mechanism adopted by the
EU to account for the carbon emissions associated with the
production of carbon-intensive goods that are exported to
the EU. Simultaneously, it seeks to promote the adoption of
greener production systems in the exporting countries. This
policy is closely aligned with the EU Emission Trading Systems
(ETS) which was adopted by the EU to achieve the targets of
decarbonising the EU industry as part of its ‘Fit for 55’ strategy.
Currently, CBAM focuses solely on Scope 1 emissions, which are
direct emissions produced during manufacturing. Scope 2 and 3
are indirect emissions produced during the production of energy
for the factory and emissions produced during the transportation
of the goods manufactured respectively. However, the EU
Commission plans to evaluate the effectiveness of CBAM by the
end of the transition period, scheduled to conclude on January 1,
2026, and may consider incorporating Scope 2 and 3 emissions.
The EU positions itself at the forefront of international efforts to
fight climate change. They use these regulations to achieve their
larger ambitious goal of Fit for 55 strategies and address the
issues of carbon leakages aligning with their ETS systems. The
Fit for 55 strategy is the green deal of the EU aiming at reducing
greenhouse gas emissions by 55% before 20301.
purchase emissions allowances ETS system. The CBAM - Carbon
from firms that produce emissions fee imposed on imports is equal
way below the set limit. This to the price imposed on the same
would act as an incentive for domestic products manufactured
innovative companies to reduce in the EU under the ETS.
their emissions and convert their
emission reduction allowances
Applicability of CBAM
into certifications that be traded
As per the policy, starting from
with other firms. ETS is an
October 1, 2023, all imports into
idea that enables governments
the EU will be subject to scrutiny
to subject the carbon being
under the guidelines of CBAM,
produced by firms to basic
economic concepts of supply and and the EU will commence the
collection of carbon taxes from
demand.
January 1, 2026. The EU, which
CBAM is designed to incorporate already has the ETS system in
the cost and competitive place, emphasizes that CBAM
advantage for firms producing in will gradually serve as an
the EU and adhering to the EU- alternative to it.
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THE CHARTERED ACCOUNTANT

SUSTAINABILITY
Sectors on which CBAM is for the goods covered under under the EU ETS. The national
applicable this scheme. These firms will authorities (of the EU) will sell
then track the emissions of CBAM certificates based on the
Initially, the CBAM is applicable to
the following imports into the EU. imported goods and the declared emission values to the registered
emissions need to be verified by importers and the EU customs
● Cement an accredited verification agency. authorities will only allow imports
● Iron & Steel These importers will then maintain of these registered entities also
● Aluminium a balance of carbon certificates called as CBAM declarants.
● Fertilizers based on these emissions. The EU Commission will take
stock of these certificates and
● Electricity Starting from1st January 2026, the emissions embedded in
● Hydrogen all the GHG emissions generated them every year by May 31. The
From 1st October 2023, EU by the Indian exporters will be Indian exporters have to comply
importers will first register converted into CBAM certificates with their EU importers on these
with their National Authorities based on the carbon prices information points at all stages.
The HSN Codes (4-digit levels) that are impacted by the CBAM are as follows:

Table 1: HSN Codes at 2 - digit level for CBAM applicable sectors

Sr. No Sector HSN Codes (At 2-digit level)

1. Cement 2523 (Only one product line, hence 2523 is considered)
2. Iron & Steel 72 and 73
3. Aluminium 76
4. Fertilisers 31
5. Electricity 2716 (Only one product line, hence 2716 is considered)
6. Hydrogen 2804 (Only one product line, hence 2804 is considered)

Impact on India and the
world
The EU is India’s third largest
trading partner, accounting for
10.8% of total Indian trade,
after the USA and China. India
is the EU’s 10th largest trading
partner commanding 2.1%2 CEMENT (HSN Code:
of the total trade. Let’s delve 2523)
deeper into the sector-specific
The following is the value of
repercussions of the EU’s
Cement that the EU has imported
Carbon Border Adjustment
for the last three years compared
Mechanism (CBAM) on India’s
to the world.
exports to the region.

Table 2: Value of Cement imported by EU in comparison to the world in the last three years.

Sr. No Year Value of Cement (HSN 2523) Imported (in Billion USD)

EU 27 (Percentage) World (Percentage)

1. 2022 3.09 (20.58%) 15.01 (100%)

2. 2021 2.83 (17.38%) 16.28 (100%)
3. 2020 2.26 (16.82%) 13.44 (100%)

Source: ITC Trade Map Data

2
https://www.europarl.europa.eu/factsheets/en/sheet/160/the-european-union-and-its-trade-partners#:~:text=Main%20EU%20
trade%20partners&text=Other%20important%20trade%20partners%20for,%25)%20and%20India%20(2.1%25).)

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SUSTAINABILITY THE CHARTERED ACCOUNTANT

On an average EU-27 imports 20% of the world’s total traded cement. This indicates the importance of the
EU in the world cement market as depicted in table 3.

Table 3: India’s cement exports to EU-27 from 2018 to 2020

Sr. No Year Value of Cement exported by India to the EU

Value (in Million USD) Percentage of Total EU’s Percentage of India’s exports
cement import (in that product line) to EU
1. 2020 0.04 0.024% 0.03%
2. 2021 0.01 0.056% 0.01%
3. 2022 0.01 0.046% 0.05%

Source: ITC Trade Map and https://tradestat.commerce.gov.in/eidb/ergncom.asp

As illustrated in Table 3, India’s
cement exports to the EU are
relatively minimal in value,
suggesting that the introduction
of the CBAM for the cement
sector may not bear significant
consequences. While the CBAM
policy currently encompasses
the cement sector, clarification
on the potential inclusion of the
Table 4: Value of EU imports compared to the world in the last 5 years
raw materials is anticipated in the
upcoming months.
IRON & STEEL
(HSN Code: 72)
EU-27 being the economic
powerhouse and base for
many manufacturing industries,
especially the Automotive
industry, has a huge demand for
Iron and steel. This sector plays
an important role in the overall
economic growth of the EU and
the subsequent spillover effects
on other countries and sectors.
As shown in Tables 4 & 5, more
than 1/3rd of the world’s Iron
and steel are imported by the
EU alone.

Sr. No Year Value of Iron & Steel (HSN 72) Imported (in Billion USD)

EU 27 (Percentage) World (Percentage)

1. 2022 216.57 (37.18%) 582.47 (100%)

2. 2021 195.84 (35.29%) 554.92 (100%)
3. 2020 114.56 (33.75%) 339.39 (100%)
4. 2019 138.35 (35.33%) 391.51 (100%)
5. 2018 162.78 (36.89%) 441.25 (100%)

Source: ITC Trade Map Data

Table 5: Value of EU imports compared to the world in the last 5 years

Sr. No Year Value of Iron & Steel (HSN 73) Imported (in Billion USD)

EU 27 (Percentage) World (Percentage)

1. 2022 131.78 (35.62%) 370.00 (100%)
2. 2021 122.87 (35.72%) 343.93 (100%)
3. 2020 93.12 (33.63%) 276.93 (100%)
4. 2019 100.84 (32.41%) 311.12 (100%)
5. 2018 106.41 (33.11%) 321.38 (100%)

Source: ITC Trade Map Data

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THE CHARTERED ACCOUNTANT

The Iron and Steel industry is one
of the largest industrial polluting
sectors in the world accounting
for almost 7% of the global GHG
emissions. India is one of the
major exporters of Iron & Steel
to the EU as shown in table 6.
During the year 2015-2020, these
sectoral exports have grown at
a rate of 8.4% per annum from
SUSTAINABILITY
India to the EU. On average India
is exporting 6 billion USD worth
of Iron & Steel products to EU-27
which would now be taxed as per
the CBAM.

Table 6: Comparison of India’s exports of Iron & Steel to EU

Sr. Year Value of India’s Exports of Iron & Steel (HSN 72 Percentage of India’s exports to EU -
No and 73) to the EU (in Billion USD) 27 compared to World

HSN 72 HSN 73 HSN 72 HSN 73

1. 2020 2.54 1.34 23.9% 21.4%

2. 2021 5.96 2.00 28.1% 23.9%
3. 2022 4.10 2.05 27.0% 20.7%

Source: ITC Trade Map and https://tradestat.commerce.gov.in/eidb/ergncom.asp

As illustrated by Table 6, nearly Aluminium products (HSN

24% of India’s Iron and Steel
exports are directed to the
EU. This underscores the EU’s
significance as a market for
India’s Iron & Steel products
under the HSN codes 72 and
73. According to the Federation
of Indian Export Organisations
(FIEO), the proposed CBAM would
lead to an approximate 20%
increase in the prices of Indian
exports. Such a substantial hike is
daunting for an inherently price-
sensitive sector, likely resulting in a
profound impact on India’s export
performance. India might lose its
affordable export tag if CBAM is
implemented thoroughly.
Code: 76 at 2-digit level) EU-27 being
India exported almost 3.4% of the economic
the world’s Aluminium products in powerhouse and base for
2022, which is ranked 8th globally. many manufacturing
In 2022 alone, India exported
around 9597.95 million USD worth
industries, especially the
of Aluminium products to the Automotive industry,
has a huge demand for
world with an annual growth rate
of 20% per annum from 2018 to Iron and steel.
2022. At the same time, EU-27
has imported this product line
to the tune of 105 billion USD in
2022, alone with a 38.6% share in
The following table shows
world’s imports. During the years
India’s exports of Aluminium
between 2018 to 2022, EU-27 has
products to EU-27 during the
increased their imports at rate of
years 2020 to 2022.
11.5% per annum in value.

Table 7: Value of India’s exports to EU

Sr. Year Value of India’s Exports of Percentage of India’s share Percentage of India’s export
No Aluminium products (HSN in EU’s imports to EU
76) to the EU (in Billion USD)

1. 2020 0.47 0.78% 9.23%

2. 2021 2.27 2.60% 39.33%

3. 2022 2.24 2.09% 21.1%

Source: ITC Trade Map and https://tradestat.commerce.gov.in/eidb/ergncom.asp

3
https://www.globalefficiencyintel.com/steel-climate-impact-international-benchmarking-energy-co2-

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SUSTAINABILITY THE CHARTERED ACCOUNTANT

As evident from Table 7, India’s
exports to EU accounts for
20% on an average of the
total Aluminium Exports, with
the average value of trade is
high for India’s products at an
average of 2000 Million USD.
Hence, introduction of CBAM
shall have a significant impact
on the export of Aluminium
products which should compel
the Indian industries to re-
evaluate their practices.
Fertilizers (HSN CODE: 31)
During 2022, the fertilizer industry
of the World has imported to the
tune of 151 billion USD, while
the EU for the same period has
imported 29 billion USD from
various countries. Table 8 below
indicates the EU’s imports in
percentage compared to the
world in the years 2018 to 2022.
Almost 19% of the world’s
fertiliser imports are carried out by
EU-27 alone.

Table 8: Comparison of EU’s imports of fertilisers compared to the world

Sr. Year Value of Fertiliser Imports to the Percentage of Fertiliser imports to EU-27
No world in Billion USD compared to the world’s imports

1. 2018 68.81 18.87%

2. 2019 71.09 18.56%

3. 2020 64.86 18.90%

4. 2021 98.23 18.27%

5. 2022 151.00 19.78%

Source: ITC Trade Map

Given India’s primary emphasis demand for fertilizers in the implications of the CBAM on
on agriculture, the country’s country, India predominantly India’s fertilizer exports, we delve
global exports of fertilizer remain acts as a net importer of these into its fertilizer trade dynamics
limited. With the persistent high products. To assess the potential with the EU-27.

Table 9: Comparison of India’s exports of fertilizers to the EU

Sr. Year Value of India’s Exports of Percentage of India’s share in Percentage of India’s
No Fertiliser products (HSN 31) EU’s imports export to EU
to the EU (in Million USD)
1. 2020 4.01 0.045% 3.4%
2. 2021 1.54 0.054% 1.4%
3. 2022 1.75 0.064% 2.07%

Source: ITC Trade Map and https://tradestat.commerce.gov.in/eidb/ergncom.asp

As shown in Table 9, India’s the EU seems nearly unfeasible.

exports of fertilizers to EU are
meagre in comparison to other
countries and other India’s
exports to EU, hence, this sector
won’t be much impacted in terms
of value of products exported due
to CBAM.
Electrical Energy
(HSN Code 2716)
Given India’s geographical
distance, exporting electricity to
While the EU stands out as a
significant electricity importer
on the global stage, India
primarily exports electricity
to its immediate neighbours,
Bangladesh and Nepal, and
imports electrical energy from
Bhutan. The data below reveals
that the EU accounts for an
impressive average of 61.5% of
global electrical energy imports.
As electricity derived from

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THE CHARTERED ACCOUNTANT

SUSTAINABILITY
fossil fuels is a major contributor to pollution, the introduction of CBAM is poised to address this concern
effectively.

Table 10: Electrical energy imports of EU-27 compared with the world

Sr. Year Value of Electrical Energy Imports to Percentage of electricity imports to EU-27
No the world in Billion USD compared to the world’s imports

1. 2018 34.46 59.40%

2. 2019 32.19 57.36%

3. 2020 29.00 51.36%

4. 2021 66.52 63.98%

5. 2022 129.53 75.02%

Source: ITC Trade Map

Hydrogen (HSN Code 2804)

Table 11: Hydrogen imports of EU-27 compared with the world

Sr. Year Value of hydrogen Imports to the Percentage of Hydrogen imports to EU-27
No world in Billion USD compared to the world’s imports

1. 2018 12.32 22.56%

2. 2019 9.94 25.55%

3. 2020 9.18 26.57%

4. 2021 13.11 21.74%

5. 2022 18.08 21.85%

Source: ITC Trade Map

Table 12: Comparison of India’s exports of Hydrogen to the EU

Sr. Year Value of India’s Percentage of Percentage

No Exports of India’s share in of India’s
Hydrogen (HSN EU’s imports exports to
2804) to the EU EU
(in Million USD)

1. 2020 0.91 0.037% 9.75%

2. 2021 0.28 0.0098% 2.78%

3. 2022 0.38 0.0096% 2.42%

Source: ITC Trade Map and https://tradestat.commerce.gov.in/eidb/

ergncom.asp

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SUSTAINABILITY THE CHARTERED ACCOUNTANT

As shown in the Table 11,
almost 23.5% of the world’s
Hydrogen imports are to
EU-27, which indicates the
large market share that EU
commands. In the year 2022,
EU imported 3.95 billion USD
worth of Hydrogen, in which
India exported 0.38 million USD
worth of Hydrogen, which is
2.42% of EU’s imports. Hence,
this is not a significant number,
therefore will not have a notable
impact on India’s exports to EU.

Conclusion
Table 12: Summary table indicating the percentage of India’s export to EU in 2022 in the sectors that
are impacted by CBAM legislation

S. Product Line and HSN Code Percentage of India’s exports (in that
No product line) to EU in 2022

1. Articles of iron or steel (HSN Code: 73) 22.72%

2. Iron and Steel (HSN Code: 72) 26.04%
3. Aluminium (HSN Code: 76) 21.4%
4. Cement, including cement clinkers, whether or not 0.05%
coloured (HSN Code: 2523)
5. Fertilisers (HSN Code: 31) 0.002%
6. Electrical Energy (HSN Code: 2716) 0%
7. Hydrogen (HSN Code: 2804) 2.42%

Source: ITC Trade Map and https://tradestat.commerce.gov.in/eidb/ergncom.asp

Of all the 6 sectors that CBAM
currently targets, Iron & Steel
and Aluminium are the most
effected sectors for India due to
this carbon tax. It will increase
the prices of India’s exports and
render it in competitive compared
to other countries.
But all the countries are arguing
that the CBAM policy appears
to lean towards protectionism.
Many developing nations lack
the financial capacity to invest in
emission-reducing technologies,
which predominantly originate
from Western countries. This
often compels exporters to
source these technologies from
the developed world, creating
a cyclical dependency under
the guise of combating climate
change.
Also, India should develop
its own Emissions Trading
System (ETS) or come up with
its own policy framework to
introduce carbon pricing in
manufactured goods to attract
more investments. By adopting
a capitalistic approach to reduce
greenhouse gas emissions and
integrating sustainable practices,
especially in the effected
sector, Indian exporters can
achieve greater efficiency and
sustainability.



Author may be reached at

camanaschugh@gmail.com and
eboard@icai.in

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MANAGEMENT AND INNOVATIONS THE CHARTERED ACCOUNTANT

Driving Innovation in Finance &

Accounting
This article provides insights into critical aspects of innovation
in finance and accounting. Innovation is crucial in transforming
traditional finance and accounting practices and driving
technological advancements. Innovations helps organizations
think dynamically and overcome the challenges of creating
a differentiated position in the marketplace. By embracing
innovation, organizations can enhance efficiency, accuracy,
and decision-making process. Innovation drives the adoption
of automation and technology as robotic process automation
(RPA), artificial intelligence (AI), and machine learning (ML)
are revolutionizing routine financial tasks. It also includes
CA. Vineet Jain data analytics, visualization, and the adoption of solutions that
Member of the Institute streamline processes and enhance user experiences.

D
uring my finance
consulting journey with
clients, I have always
emphasized innovation and its
potential to transform the finance
function. In this fast-changing
environment, companies always
look for transformation catalysts
to impact the bottom line
positively. Transformation and
innovation are two interrelated
concepts that drive progress
and change in the operation of
an organization. Innovation in
finance and accounting refers
to implementing new ideas,
processes, technologies, and
strategies that bring positive
changes and advancements
in financial and accounting
functions. It involves the
application of creative thinking
and adopting innovative solutions
to enhance efficiency, accuracy,
and decision-making.
Organizations can innovate in
several forms. It could be with
technology, process, product,
or service. Innovation with

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THE CHARTERED ACCOUNTANT
Innovation does
not always mean
creating new products
but also adopting
new working methods
or making processes
robust with new
technologies.
technology involves the adoption
of new technologies such as
artificial intelligence (AI), machine
learning (ML), robotic process
automation (RPA), blockchain,
etc. These technologies
automate, streamline, and
standardize processes, improve
data accuracy, enhance
analysis capabilities, and drive
operational efficiency.
Similarly, process innovation
focuses on redesigning existing
financial and accounting
processes to improve efficiency,
reduce costs, and eliminate
bottlenecks. It involves
reevaluating workflows,
reengineering processes, and
implementing best practices to
optimize resource allocation and
enhance productivity. Product
or service innovation, involves
creating innovative solutions that
meet evolving customer needs,
such as digital systems for
customer engagements, peer-
to-peer lending platforms, digital
payment systems, and online
financial planning tools.
The beginning of the
thought process around
innovation
Innovation in a company begins
with an organized approach
and a supportive environment.
The organization develops its
potential trajectory for the next
few years and incorporates
innovation-driven growth into
strategic plans. Gone are the
days when companies built
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MANAGEMENT AND INNOVATIONS
long-range five-year plans by
extrapolating the numbers.
Strategic plans are now of
shorter ranges and are built
considering the probabilities of
how innovation can drive growth,
competitiveness, and long-term
success for the company. As a
result, this requires organizations
to allocate resources in the
areas where innovation is
most needed or significantly
impacts the company’s financial
performance. For example,
innovation in accounting may
include redefining the processes
to close the books faster,
real-time visibility of financial
statements and financial
consolidation, automation of
journal entries, and account
reconciliations.
Innovation can happen in a
large company similar to a
start-up
We can learn several aspects
from the start-up innovation
culture. As new ventures
operating in highly competitive
and dynamic environments,
start-ups often face unique
challenges and opportunities that
demand innovative thinking and
approaches.
In start-ups, what makes a
difference is the focus on
developing new products
or services, entering new
markets, and fostering a culture
of innovation. Start-ups are
always enthusiastic about new
and emerging technologies,
developing robust processes,
and managing evolving customer
preferences. It is often difficult for
start-ups to continuously spend
on research and justify the need
for more investments.
Unlike start-ups, large companies
can self-fund innovation
investments with internal
resources and face less intense
financial justification needs for
625
spending. Continuous analysis of
prevailing conditions allows the
company to identify areas where
innovation can significantly
impact its performance and
market position. A large
company can substantially
increase its growth rate with
dedicated resources to support
innovation efforts and assign
sufficient financial budgets
available in a time of need.
Innovation-specific metrics can
also be used to track progress
and ensure accountability, such
as savings in person-hours due
to automation in the accounting
monthly close or increase in
financial accuracy (%) due to
the use of artificial intelligence
and machine learning algorithms
in the financial planning and
analysis (FP&A) processes.
Therefore, large companies must
build innovation goals into each
of their functions.
Use of Innovative products
that transformed an
Accounting Function
Innovation does not always
mean creating new products
but also adopting new working
methods or making processes
robust with new technologies.
Knowledge about third-party
tools and efficient ways of
working can be achieved through
external expertise, mentorship
with industry experts, or white
papers. These collaborations can
provide access to resources and
knowledge to enhance innovative
capabilities.
It is worth sharing as an example
of the recent innovation in
the treasury function where
a company tried to use an
innovative Treasury Management
System (TMS) to perform
treasury operations. TMS
frees teams’ time from manual
activities on routine work and
enables better cash visibility. It
automates daily cash positioning,
NOVEMBER 2023 81
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MANAGEMENT AND INNOVATIONS
Integration of the
bank system and
Treasury Management
System has never been so
straightforward.
forecasting, and vendor payment
processing. As technology
evolves, the significance of
treasury operations can increase
as organizations seek to leverage
these tools in several areas for
greater efficiency and accuracy.
TMS enables process
automation, utilizes artificial
intelligence, and machine
learning technologies, enhances
data analytics capabilities, and
improves decision-making.
Ensuring efficient and effective
handling of an organization’s
cash resources has always
been critical, and TMS systems
can play a significant role
in transformations. All the
activities relating to developing
cash flow forecasts to project
the organization’s future
cash inflows and outflows,
maintaining sufficient liquidity
to meet day-to-day financial
obligations and unexpected
expenses, optimally utilizing the
cash, etc., are the candidates
for automation. Also, parallelly
meeting all the due obligations
to vendors, calculating Days
Sales Outstanding (DSO), and
banking collection process, can
be automated to a greater extent.
Integration of the bank system
and Treasury Management
System has never been so
straightforward.
Transaction data from the banks
containing daily transactions
is crucial for the treasury.
Companies are adopting
technology advancements in
bank integration with ERP or
standalone software to import all
the statement items and publish
82 NOVEMBER 2023
them to appropriate codes and
categories. Due to the high
adoption of TMS, most banks
understand the requirements and
have adapted their systems to
provide the input file in the format
that can be consumed in TMS.
With a seamless collaboration
with the Bank IT team, the
data gets transmitted in Bank
Administration Institute (BAI)
file format daily via Secure
File Transfer Protocol (SFTP),
eliminating the need to download
daily statements every morning
manually and data entry in
Microsoft Excel. Excel does
provide flexibility to deal with
data, but working solely in Excel
is very traditional, involves a lot of
manual effort, time-consuming,
and is prone to errors.
Bank data integrations have
changed the working methods
in cash management reporting
and allowed systems to import
the data at pre-scheduled times.
Once customized models are
created, data flows from the
bank daily and is loaded in the
allocated cash transaction codes
for further reporting. It requires
building one-time codes based
on the application’s definitions
and keywords to identify the
transactions and their expected
accounting buckets. One-time
customizations are also helpful
when teams need insights in
a particular fashion to meet
stakeholders’ requirements. High
accuracy can be experienced
in Cash flow forecasting with
Artificial Intelligence.
Similarly, the cash flow
management is another
responsibility of the treasury
team. It involves monitoring
and analyzing an organization’s
cash inflows and outflows.
In TMS, cash flow processes
are streamlined by creating
customized models to forecast
daily, weekly, and monthly cash
THE CHARTERED ACCOUNTANT
flows in real time. It also includes
automation around optimizing
cash levels and target balances,
such as cash pooling, short-term
investments, and borrowing
usage, while minimizing
unutilized cash at the end of
the day and reinvesting it to
maximize the cash flows. These
models use artificial intelligence
and machine learning algorithms
that read the past month’s data,
identify drivers, analyze the
current state of receivables, and
accurately accommodate high-
value transactions’ impact to
predict daily, monthly, or yearly
forecasts.
This example of treasury
transformation is to showcase
the use of advanced
technologies. Promoting
innovative ideas in Finance
and Accounting can bring
more process standardization
and adoption of advanced
analytics tools. Standardization
and streamlining of processes
improve efficiency, eliminate
redundant activities, and free
up time for strategic areas. It
includes implementing best
practices used by world-class
organizations, documenting
standard operating procedures
(SOPs), and using workflow
automation tools can optimize
end-to-end accounting
processes. Using technology to
manage accounting functions
promotes collaboration,
reducing inconsistency and
operational errors. Advanced
data analytics and reporting
tools can be leveraged to gain
deeper insights from financial
data. Data visualization with
High accuracy can
be experienced in
Cash flow forecasting
with Artificial
Intelligence.
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THE CHARTERED ACCOUNTANT
AI-based software and business
intelligence tools can help
identify trends and patterns,
enabling accountants to provide
stakeholders with more informed
and strategic recommendations.
What level of organization
brings Innovation - the
Junior or the senior level?
Innovation is universal, and
ideas can come from anywhere.
For example, in the healthcare
industry, there are separate
research and development labs;
in technology companies, it is
around product development, or
in a finance department, it could
even be an analyst that records
financial transactions. Generally
said, it comes from people who
are involved in the process.
These people are hands-on and
leverage their expertise and
analytical skills to satisfy the
needs of customers, clients, and
stakeholders. They understand
the situation, diagnose the
problems and develop solutions,
provide objective advice,
facilitate change, and support
clients in achieving their desired
outcomes. With the exposure
to latest relevant technologies,
they are essential resources that
are the foundation of desired
innovation culture. It all begins
with empowering employees,
giving them the autonomy
to think, freedom to explore
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MANAGEMENT AND INNOVATIONS
innovative ideas, or even fail
trying something innovative.
Organizations should create an
open culture for the teams that
are built on the free expression of
curiosity and lack of fear of failure.
Leaders should promote open
communication, collaboration,
and a mindset that embraces
creativity, risk-taking, and
continuous improvement. Leaders
should actively demonstrate their
commitment to innovation and
provide the necessary resources
and support for employees to
explore new ideas.
Building an Innovation
Culture
Building an open channel for
free communications is vital
to innovation culture. Leaders
should build innovative SMART
goals (Specific, Measurable,
Achievable, Relevant, and
Time-bound.), encourage
teams to brainstorm ideas
and open the accessibility for
people at all levels to present
ideas. Establishing a structured
process for managing ideas
within the organization which
can include implementing
idea management software or
platforms where employees
can submit, discuss, evaluate,
and develop ideas. Create
a transparent and inclusive
system that allows ideas to be
627
shared, refined, and tracked
throughout the innovation
process. Embracing innovation
can significantly enhance the
effectiveness and visibility of
finance and accounting functions
in organizations.
In conclusion, investing in
innovation will strengthen
the organization and ensure
future success. As a result
of innovation, finance teams
can shift their focus from
transactional roles to strategic
partnerships within the
organization. By automating
routine tasks and leveraging
advanced analytics, teams can
provide more valuable insights
that would improve financial
performance. Innovative efforts
would help digitalize finance and
accounting processes, reduce
manual workloads, and increase
operational efficiency. This would
pave the path for informed and
data-driven decision-making,
on-demand financial closure, and
automated financial management
processes. Innovative culture can
bring a fresh perspective to daily
life, ensuring enterprise-wide
motivation, competitiveness, and
long-term financial stability.

Author may be reached at
Cavineet@gmail.com and
eboard@icai.in
NOVEMBER 2023 83
630
OPINION
Recognition of miscellaneous scrap
items generated in the plant and
scrapped assets awaiting disposal
under Ind AS Framework
A. Facts of the Case
1. A Company (hereinafter referred to as ‘the
Company’) is a public sector enterprise under the
administrative control of the Ministry of Mines,
Government of India and is engaged in mining of
bauxite, manufacturing of alumina and aluminium,
generation of power at captive power plant for use
in smelter, and selling of alumina and aluminium
both in domestic and international markets. Besides,
the Company is also engaged in generation of wind
power with setting up of wind power plants at
distinct locations in the Country. The Company has
four production units. Details are furnished below:
a. Fully mechanised Open Cast Bauxite Mine
having excavation capacity of 68,25,000
tonnes per annum;
b. Aluminium Refinery having production
capacity of 22,75,000 tonnes per annum;
c. Captive Power Plant having power
generation capacity of 1200 megawatt
(MW); and
d. Aluminium Smelter Plant of 460,000 tonnes
capacity per annum.
In addition, there are 4 Wind Power plants of about
50MW each located in different states.
2. Mines Division, which is located uphill, serves
feed-stock to the alumina refinery located 16 km
downhill. Apart from domestic and export sale of
alumina, the refinery unit provides alumina to the
Company’s smelter plant which is about 600 km
away by specially designed alumina wagons by rail
transport. For production of 1 metric tonne (MT) of
aluminium at smelter, about 13,600 kilowatt-hour
(kWh) of power is required, which is met by captive
power plant situated at 4 km away from the smelter
plant. Calcined alumina and thermal power are two
important inputs for producing aluminium metal. The
production process starting from bauxite mines to
alumina refinery to aluminium smelter and captive
power plant is fully integrated. Sale of calcined
86 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
alumina and aluminium metal is the main stream of
revenue for the Company. Its product profile includes
hydrate, calcined alumina, ingots, billets, wire rod
and rolled products.
3. Accounting for scrap followed by the Company:
The scrap generated at the plant is of two types:
a. Process scrap (aluminium scraps, anode
rejects and butts)
b. Miscellaneous scrap (used spares, used oil
and lubricants, incoming packing materials,
discarded and scrapped assets etc.)
a. Process Scrap: Scraps generated in the
process of aluminium metal production are known
as ‘Process Scrap’ and are re-used in the process
by remelting the same. The process scraps are not
sold in the market. The generation of such scrap
is recognised as ‘change in inventory of finished
goods and work-in-process’ in the Statement of
Profit and Loss of the Company and the inventory on
the reporting date is presented as an intermediary
under the inventory in the Balance Sheet of the
Company. Such scraps, being reusable in the
production process are not intended for sale and
are valued at cost.
b. Miscellaneous Scrap: This category of scrap
is mainly generated from used spares, oil and
lubricants, packing materials and scrapped plant
and machineries. These items have no use other
than selling as scrap. The miscellaneous scraps
are sold through e-auction platform. Such kind of
scraps are collected in the scrap yard for disposal
and are measured at every reporting date. The
same is valued at the available market price (based
on the last sale transaction) or the estimated price
fixed by the management for disposal. The change
in inventory and sales of miscellaneous scraps are
recognised as ‘Other Income’ in the Statement of
Profit and Loss. The inventory of miscellaneous
scrap as on the reporting date is disclosed under the
head ‘Inventory’ in the Balance Sheet with a distinct
sub-head as ‘Scrap’ at the Note No. 15 to the
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THE CHARTERED ACCOUNTANT
financial statements of the Company for the financial
year (F.Y.) 2021-22. The recognition of miscellaneous
scrap by the Company is as follows:
i. Such miscellaneous scraps are tangible
items having economic value and are having
market for disposal.
ii. The items are regularly generated during
operation of plant and are being sold/
disposed through e-tendering. Income from
sale of miscellaneous scrap is recognised as
other income.
iii. On generation of stock of miscellaneous
scrap, the Company makes the valuation at
the available market price or the estimated
price fixed by the management for disposal.
The change in such inventory of scrap is
recognised as other income.
Income recognised against such miscellaneous
scrap and inventory of scrap during the last three
years are as follows:
2021-22 2020-21 2019-20
Income 33.77 15.71 19.52
recognised
during the
year (₹ in
crore)
Inventory 16.91 13.82 14.71
at the year
ending date
(₹ in crore)
4. Observations of Audit: During the course of audit
of annual accounts of the Company for F.Y. 2021-22,
the statutory auditors of the Company have advised
to review the accounting policy of the Company
with regard to the miscellaneous scrap items. The
observations are as below:
a. With regard to valuation of miscellaneous
scrap: Generally, the miscellaneous scraps
are generated from the discarded/ broken
parts of equipment, packing materials etc.
whose cost has already been charged off in
the Statement of Profit and Loss and hence,
cost of the discarded parts is Nil. As per
paragraph 9 of Indian Accounting Standard
(Ind AS) 2, ‘Inventories’, the inventory shall
be measured at lower of cost or net realisable
value (NRV). In the present case, since the
cost is nil, the miscellaneous scrap etc.
shall be valued as ‘Nil’ and revenue shall be
recognised as income on completion of sale
www.icai.org
631
OPINION
only. There should not be any recognition on
generation of scrap.
b. With regard to presenting the miscellaneous
scrap under ‘Inventories’ in the Balance
Sheet and revenue under ‘other income’:
The auditors are of the view that the
‘miscellaneous scrap’ does not fall within
the definition of inventory as per paragraph
6 of the Ind AS 2, ‘Inventories’. Therefore,
the same shall not be included in inventory.
Further, if the Company includes the
miscellaneous scrap under inventory, then
the Company should classify the revenue in
‘Revenue from operations’ instead of ‘Other
Income’.
Views of the Management:
5. The classification of scrap has not been
defined in Ind AS. Therefore, the Company followed
paragraph 10 of Ind AS 8, ‘Accounting Policies,
Changes in Accounting Estimates and Errors’,
which states that in the absence of an Ind AS that
specifically applies to a transaction, other event or
condition, management shall use its judgement in
developing and applying an accounting policy that
results in information that reflects the economic
substance of a transaction. Accordingly, the
Company mentions the classification and valuation
of scrap in its accounting policy at Note No. 3.10
to the financial statements of the Company for F.Y.
2021-22.
a. With regard to valuation of miscellaneous
scrap: Scraps generated are the tangible
assets generated in the process of
production having economic value, which
is recognised as inventory based on net
realizable value (NRV). As these scraps are
having no measurable cost of purchase/
manufacturing, the Company carries these
miscellaneous scraps at its fair value i.e.
net realizable value or estimated price in the
books of account to reflect the economic
substance of the assets. Recognition of
income from scrap only on completion
of sale and not recognising the same at
the time of generation of scrap would not
comply the accrual basis of accounting.
b. With regard to presenting the miscellaneous
scrap under ‘Inventories’ in the Balance
Sheet and revenue under ‘other income’:
The Schedule III to the Companies Act, 2013
classifies the inventories as:
i. Raw materials;
ii. Work-in-progress;
NOVEMBER 2023 87
632
OPINION
iii. Finished goods;
iv. Stock-in-trade (in respect of goods
acquired for trading);
v. Stores and spares;
vi. Loose tools;
vii. Others (specify nature).
Since, there is an option to include additional line
item, i.e., ‘Others (specify nature)’, the Company
included the scrap under this head and reported
under ‘Inventories’ in the Balance Sheet.
Sl Source of Scraps
No.
1 Scrapped property, plant, equipment: When
an item of PPE is discarded after it completes
its useful life or becomes uneconomical to
be operated, the same is removed from the
PPE and kept as inventory after scrapping.
The Company does not sell any item of fixed
assets as such. All these discarded items
of PPE are scrapped and sold as machine
scraps.
2 Used spares: When a spare part of any plant
and machinery is replaced with new one after
expiry of its useful life and the old used spare
is collected for disposal and recognised as
scrap.
3 Used transformer oil: After a certain period
of operation, old transformer oil is taken out
and is replenished with fresh oil. The old used
oil is kept as scrap.
4 Empty Containers/ bags carrying input
materials: Many chemicals used in the plants
are supplied by the vendors in containers/
bags. The empty containers/ bags are kept as
scrap for disposal.
5 Used tyres: Many heavy earth moving
machineries (HEMMs) and equipments
are engaged in Mining and movement of
materials. Damaged tyres of such HEMMs are
replaced with new one and the old one is kept
as scrap.
88 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
6. With regard to the nature of miscellaneous scrap
and nature of items covered thereunder, the querist
has separately clarified that the miscellaneous scraps
are generated from various sources and constitute of
scrapped property, plant and equipment (PPE), used
spares, used transformer oil, electrical cables, steel
scraps, empty containers carrying input materials,
used tyres, etc. The major source of generation of
such scraps and its accounting treatment before
these are declared as scraps are given below:
Accounting treatment before it is
considered as scrap
Before an item of PPE is scrapped, the same
is continued as fixed asset at its carrying
value (WDV).
a. Major Spares: As it forms part of the PPE,
accounting treatment explained at Sl. No. 1
is also followed for major spares.
b. General Spares: Spares other than major
spares are charged to repair and maintenance
expenses when it is issued from the store for
consumption. So, before scrapping, these
spares are considered as revenue expenses.
Fresh oil issued for the transformer is charged
to expenses before replenishment.
There is no identified price element of such
containers which is otherwise included in the
material/ input cost.
Hence, there is no such specific accounting
of such containers before it is considered as
a scrap item.
The cost of the tyres is charged to expenses
when these are issued from the stores and
fitted into the HEMMs. So, before considering
them as scrap, the tyres are charged to
revenue expenses.
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THE CHARTERED ACCOUNTANT
Scraps collected are valued at their respective fair
value (reserved price/ market price) and recognised
in the books of account.
B. Query
7. In view of above, the querist has sought the
opinion of the Expert Advisory Committee (EAC) of
the Institute of Chartered Accountants of India (ICAI)
on the following issues:
(i) Whether the practice followed by the
Company to recognise miscellaneous scrap
as inventory is correct.
(ii) Whether practice followed by the Company
with regard to valuation of scrap at its fair
value is correct.
(iii) Whether practice of the Company to
recognise the income out of sale/change in
stock as ‘Other Income’ is correct.
C. Points considered by the Committee
8. The Committee notes that the basic issues
raised by the querist relate to appropriateness of
recognition of miscellaneous scrap as inventory, its
valuation at fair value and recognition of the income
out of sale/change in stock as ‘Other Income’. The
Committee has, therefore, examined only these
issues and has not examined any other issue that
may arise from the Facts of the Case, such as,
accounting for sale of alumina, aluminium and
calcined alumina, accounting for power generated
from captive plant and captive consumption of
alumina, accounting for process scrap (aluminium
scraps, anode rejects and butts), appropriateness
of accounting for replaced parts of PPE, accounting
for spares not scrapped, etc. Further, the Indian
Accounting Standards referred to in the Opinion are
the Standards notified under the Companies (Indian
Accounting Standards) Rules, 2015, as revised or
amended from time to time.
9. The Committee notes from the Facts of the
Case that major sources of miscellaneous scraps
are scrapped property, plant and equipment, used
spares (major spares and general spares), used
transformer oil, empty containers/bags carrying input
materials and used tyres. With regard to scrapped
property, plant and equipment, the Committee notes
that after an item of PPE completes its useful life or
becomes uneconomical to be operated, the same
is removed from PPE and kept as inventory by the
Company and is sold as machinery scraps. Similar
accounting is followed for major spares. In case of
general spares, transformer oil, empty containers/
bags carrying input materials, tyres etc., these are
considered as revenue expense when these are
www.icai.org
633
OPINION
issued. The Committee notes that Ind AS 16 does
not deal with accounting for spares on the basis of
their classification into ‘major’ or ‘general’ spares.
Accordingly, in the opinion hereinafter, the Committee
has used the expressions ‘spares treated as PPE’
and ‘spares not treated as PPE’ in accordance with
requirements of the aforesaid standard.
10. With regard to the recognition of miscellaneous
scrap containing scrapped items of PPE and spares
treated as PPE, as ‘inventory’, the Committee
notes the definition of ‘inventories’ as per Ind AS 2,
‘Inventories’ as follows:
“Inventories are assets:
(a) held for sale in the ordinary course of
business;
(b) in the process of production for such
sale; or
(c) in the form of materials or supplies to be
consumed in the production process or in
the rendering of services.”
The Committee notes from the above that since
miscellaneous scrap items as stated above cannot
be considered as finished product/by-product held
for sale, or intermediate product/work-in-progress
in the process of production, or raw material/inputs/
supplies to be consumed in the production process,
the same does not meet the definition of ‘inventories’
as per Ind AS 2. Therefore, the Committee is of
the view that such scrap items should not be
recognised as inventory. Accounting for other items
of miscellaneous scrap has been dealt with in
paragraph 14 below.
11. With regard to accounting for scrapped items
of property, plant and equipment and used spares
that are treated as PPE, the Committee notes the
following paragraphs of Ind AS 16, ‘Property, Plant
and Equipment’, which state as follows:
“53 The depreciable amount of an asset is
determined after deducting its residual value.
In practice, the residual value of an asset is
often insignificant and therefore immaterial in
the calculation of the depreciable amount.”
“67 The carrying amount of an item of
property, plant and equipment shall be
derecognised:
(a) on disposal; or
(b) when no future economic benefits
are expected from its use or disposal.
68 The gain or loss arising from the
derecognition of an item of property, plant
and equipment shall be included in profit
NOVEMBER 2023 89
634
OPINION
or loss when the item is derecognised
(unless Ind AS 116, Leases, requires
otherwise on a sale and leaseback). Gains
shall not be classified as revenue.”
“70 If, under the recognition principle in
paragraph 7, an entity recognises in the
carrying amount of an item of property, plant
and equipment the cost of a replacement
for part of the item, then it derecognises
the carrying amount of the replaced part
regardless of whether the replaced part
had been depreciated separately. If it is
not practicable for an entity to determine
the carrying amount of the replaced part, it
may use the cost of the replacement as an
indication of what the cost of the replaced
part was at the time it was acquired or
constructed.
71 The gain or loss arising from the
derecognition of an item of property, plant
and equipment shall be determined as
the difference between the net disposal
proceeds, if any, and the carrying amount
of the item.
72 The amount of consideration to be
included in the gain or loss arising from the
derecognition of an item of property, plant
and equipment is determined in accordance
with the requirements for determining the
transaction price in paragraphs 47-72 of
Ind AS 115. Subsequent changes to the
estimated amount of the consideration
included in the gain or loss shall be accounted
for in accordance with the requirements for
changes in the transaction price in Ind AS
115.”
From the above, the Committee notes that an item
of PPE shall be derecognised either on disposal
or when no future economic benefits are expected
from its use or disposal. The gain or loss from
derecognition shall be included in profit or loss
when the item is derecognised. In the extant case,
no economic benefits are expected from the use of
scrapped items of PPE and the used spares treated
as PPE, since they have either completed their useful
lives or have become uneconomical to be operated.
However, since economic benefits are expected
from such scrapped items through their disposal,
the same should not be derecognised after these
are scrapped in view of paragraph 67(b) reproduced
above.
12. The Committee is further of the view that the
scrapped items of PPE and used spares that are
treated as PPE would normally appear in the books
at their residual value as their entire economic
90 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
value has already been charged to the Statement
of Profit and Loss as depreciation during their
useful life, as per the principles of Ind AS 16 and
Schedule II to the Companies Act and therefore,
the same should be continued to be carried in the
books at their carrying amount under the net block
of PPE unless these items are impaired as per the
requirements of Ind AS 36 ‘Impairment of Assets’
and recoverable amount (which in case of these
items, would normally be their fair value less costs
of disposal rather than value in use) is less than the
carrying amount. However, since the economic
benefits are expected from these items, though
not from their continued use but their disposal, the
Company should examine whether these meet the
classification and recognition criteria of ‘non-current
assets held for sale’ as per Ind AS 105, ‘Non-current
Assets Held for Sale and Discontinued Operations’,
in which case, these should be accounted for as per
the requirements of Ind AS 105. At the time of sale
as scrap, these should be derecognised, with gain
or loss on sale being recognised in the Statement
of Profit and Loss. The gain arising on sale may be
presented as ‘other income’ in the Statement of
Profit and Loss.
13. With regard to the scrapped items, such as,
used spares not treated as PPE e.g., those used
for repairs, used transformer oil, tyres, empty
containers/bags etc., the Committee notes from
the Facts of the Case that these are charged as
expense in the Statement of Profit and Loss when
these are issued or used/consumed and therefore,
their entire cost has already been charged to the
Statement of Profit and Loss, viz., these have
already been derecognised in the books of account.
Therefore, the Committee is of the view that these
derecognised items should not be written back in
the books of account even if they exist physically,
and accordingly, question of their presentation as
‘inventories’ and valuation or revaluation at their
fair value (reserved price or market value) or net
realisable value would not arise, although for control
purposes, records in respect thereof may be kept.
Any income arising on sale of such scrap should be
recognised as ‘other operating revenue’ as per the
requirements of paragraph 9.1.10 of the Guidance
Note on Division II – Ind AS Schedule III to the
Companies Act 2013, (Revised July, 2019 Edition),
issued by the ICAI, as reproduced below:
“9.1.10. To take other examples, sale
of Property, Plant and Equipment is not
an operating activity of a company, and
hence, profit on sale of Property, Plant and
Equipment should be classified as other
income and not other operating revenue. On
the other hand, sale of manufacturing scrap
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 635

THE CHARTERED ACCOUNTANT

arising from operations for a manufacturing
company should be treated as other
operating revenue since the same arises on
account of the company’s main operating
activity.”
D. Opinion
14. On the basis of the above, the Committee is
of the following opinion on the issues raised in
paragraph 7 above:
(i) The practice followed by the Company to
recognise miscellaneous scrap as inventory
is not correct, as discussed in paragraphs
10 and 13 above.
(ii) As discussed in paragraph 12 above,
scrapped items of PPE and used spares
which are treated as PPE should be
continued to be carried in the books at their
carrying amount under the net block of PPE
unless these items are impaired as per the
requirements of Ind AS 36 ‘Impairment of
Assets’ and recoverable amount (which
in case of these items, would normally be
their fair value less costs of disposal rather
than value in use) is less than the carrying
amount. However, the Company should
examine whether these scrapped items of
PPE meet the classification and recognition
OPINION
criteria of ‘non-current assets held for sale’
as per Ind AS 105 ‘Non-current Assets Held
for Sale and Discontinued Operations’, in
which case, these should be accounted for
as per the requirements of Ind AS 105. The
scrapped items, such as, used spares that
are not treated as PPE e.g., those used for
repairs, used transformer oil, tyres, empty
containers/bags etc., these are not to be
valued or revalued at their fair value (reserved
price or market value) or net realisable value,
as discussed in paragraph 13 above.
(iii) At the time of sale of the scrapped items of
PPE and used spares which are treated as
PPE, these should be derecognised, with
gain or loss on sale being recognised in
the Statement of Profit and Loss. The gain
arising on sale may be presented as ‘other
income’ in the Statement of Profit and Loss,
as discussed in paragraph 12 above.
With regard to the scrapped items, such
as, used spares not treated as PPE e.g.,
those used for repairs, used transformer
oil, tyres, empty containers/bags etc., any
income arising on sale of such scrap should
be recognised as ‘other operating revenue’
in the Statement of Profit and Loss, as
discussed in paragraph 13 above.

1. The Opinion is only that of the Expert Advisory Committee and does not necessarily represent the
Opinion of the Council of the Institute.

2. The Opinion is based on the facts supplied and in the specific circumstances of the querist. The
Committee finalised the Opinion on February 10, 2023. The Opinion must, therefore, be read in
the light of any amendments and/or other developments subsequent to the issuance of Opinion
by the Committee.

3. The Compendium of Opinions containing the Opinions of Expert Advisory Committee has been
published in forty-two volumes. These volumes are available for sale and can be procured online
through CDS Portal at https://icai-cds.org/.

4. Opinions of the Committee may be accessed at the following link: http://115.248.235.50/eacicai/.

5. Opinions can be obtained from EAC as per its Advisory Service Rules which are available on the
website of the ICAI, under the head ‘Resources’. For further information, write to eac@icai.in.

*******

www.icai.org NOVEMBER 2023 91

636
REFERENCE
Accountant’s Browser
PROFESSIONAL NEWS & VIEWS PUBLISHED ELSEWHERE
Index of some useful articles taken from Periodicals received during September – October 2023 for the reference of Faculty/
Students & Members of the Institute.
1. Accountancy
Whether provision is required for net zero commitment
by Dolphy D’Souza. Bombay Chartered Accountant
Journal, September 2023, pp.73-74.
2. Audit
Transformative power of artificial intelligence (AI) in
Audit by K Paul Jayakar. Bombay Chartered Accountant
Journal, September 2023, pp.29-31.
3. Economics
An analysis of the recent performance of NBFC Sector
by Abbyuday Harsh, Nandini Jaykumar, Rajnish Kumar
Chandra, and Brijesh P. RBI Bulletin, September 2023,
pp.97-110.
Managerial decisions and new product development in the
circular economy model enterprise: absorptive capacity
and a mediating role of strategic orientation by Monica
Stelmaszczyk, Agata Pierscieniak and Denisa Abrudan.
Decision, v.50, no.1, 2023, pp.35-49.
4. Investment
What drives India’s outward foreign direct investment?
A country-level analysis by Mohd. Hussain Kunroo and
Full Texts of the above articles are available with the Central Council library, ICAI, which can be referred on
all working days. For further inquiries please contact on 011-30110419 and 011-30110420 or by e-mail at
library@icai.in.
5981 Retired CAs, practicing CA professionals
in Auditing/ Consultancy field, interested in
joining with a 50 years CA firm, write with details
of name of city, year of CP (preferably 10 years
of CP), DISA/CISA/CPA/CIA/CFE/IND-AS/FAFP/
GST etc. enclosing Membership Card / Firm
Status Certificate to capartnersfirm@gmail.com
5982 43 years’ old CA firm wants to open branch
offices by inducting full time practising CAs as
Partner purely on revenue sharing basis (No fixed
remuneration). Write: hoaps1980@gmail.com
5983 Required full time partners for Delhi, Chennai,
Vishakhapatnam, Hyderabad, Lucknow, Raipur,
92 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
Imran Ahmad. Economic & Political Weekly, September
30, 2023, pp.60-68.
5. Management
Create stories that change your company’s culture:
Work with these six building blocks by Jay B. Barney,
Manoel Amorim, and Carlos Julio. Harvard Business
Review, September-October 2023, pp.76-85.
Multi-item scale for open strategy measurement
by Joanna Radomska, Aleksandra Szpulak and
Przemsyslaw Wolczek, Decision, v.50, no.1, 2023,
pp.51-71.
6. Taxation and Finance
Driving synergy: Leveraging GST to achieve the
objectives of national logistics policy by Sachin Sharma
and Rahul Jhawar. Good & Services Tax Cases, vol.99,
i.4, 2023, pp.21-25.
Recent developments in GST by G G Goyal and C
B Thakar. Bombay Chartered Accountant Journal,
September 2023, pp.89-95.
CLASSIFIEDS
Rourkela and Bangalore on revenue sharing basis.
Please Contact on email id: bk1ckdk@gmail.com
5984 Gujarat headquartered 42 year old firm (www.
rkdoshi.com) wishes to open branches in
Tamil Nadu, Kerala, Punjab, AP, Telangana,
Assam, Orissa & WB. Contact: firm.rkdoshi@
gmail.com
5985 Required Part/Full time C.A’s, Semi- Qualified,
Articled Asstts, Accounts & Finance Trainees for
Gurugram, Faridabad, Sonepat, Noida, Delhi &
Jammu. Also CA’s interested in joining as Partners
may contact through e-mail: kkg200317@gmail.
com
www.icai.org
638
LEGAL UPDATES
Legal Decisions
DIRECT Income Tax
TAXES
LD/72/035
ITAT Kolkata: ITA No.319/Kol/2023
Linde India Ltd
Vs. The Dy. Commissioner of Income Tax
08th September 2023
Assessment order held to be invalid and deemed to
have never been passed, since it did not bear Document
Identification Number (DIN), as per CBDT Circular No.
19 of 2019 dt. Aug 14, 2019; Purpose of CBDT Circular
mandating DIN, is to create an audit trail; Intimation has
been sent about DIN in respect of assessment order
which is much later i.e., nine months after the date of
assessment order; Assessment order u/s 144C read with
sec 143(3) was passed manually though intimation letter
of assessment order contained DIN.
LD/72/036
ITAT Delhi: ITA No. 2742/Del/2022
The Dy. Commissioner of Income Tax
Vs. Anand Persad Jaiswal
06th September 2023
ITAT quashed reassessment order in the case of a non-
resident assessee for AY 2003-04 issued by invoking the
extend period of limitation of 16 years; Amendment to
sec 149 whereby limitation for reopening assessment
was extended to 16 years cannot be resorted-to for
reopening proceedings concluded before the said
amendment became effective, i.e. Jul 01, 2012; held that
interest income earned by the assessee was not taxable
in India as the same was accrued to the assessee from
the deposits in the bank situated outside India.
LD/72/037
ITAT Delhi: ITA No. 387/Del/2021
The Dy. Commissioner of Income Tax
Vs. Smt Aruna Chandhok
05th September 2023
ITAT held that provisions of Section 56(2)(vii)(c) are not
attracted to bonus shares received by the assessee since
the issuance of bonus shares is merely capitalisation of
the existing reserves and does not render the additional
benefits nor alters the wealth of the shareholder;
Pursuant to a bonus-share-issue, money remains with
the company and nothing comes to the shareholders as
there is no transfer of the property.
LD/72/038
ITAT Panaji: ITA No. 001/PAN/2023
Shri Bhagyalaxmi Co-Operative Credit Society Ltd
Vs. The Dy. Commissioner of Income Tax
01st September 2023
ITAT allowed deduction u/s 80P which was denied while
processing of return u/s 143(1); Provisions of Section
94 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
143(1)(v) which provide for disallowance of u/s 80P due
to late filing of return were introduced w.e.f. 01.04.2021,
therefore disallowance u/s 80P for AY 2018-19 was
unjustified; Cumulative reading of both section 80A(5)
and 80AC(ii) unambiguously lays down that from AY
2018-19 a claim for deduction under Chapter VI-A is
allowable only when the return is filed in time, however
enabling power of Revenue to disallow u/s 143(1)(a)(v)
came w.e.f 01.04.2021.
LD/72/039
ITAT Chandigarh: ITA No. 84/Chd/2023
Sant Kabir Mahsabha
Vs. The Commissioner of Income Tax (Exemption)
23rd August 2023
ITAT set aside CIT(E) order wherein he rejected
application for registration under Section 12AB
without providing any opportunity of hearing; Mere
uploading the notice of hearing on Income Tax Portal
would not suffice pre-requisites of service of notice
as stipulated u/s 282; ITAT directed the CIT(E) order
with direction to decide the appeal of the assessee
afresh and to serve notice of hearing through physical
mode as well as by email.
LD/72/040
Bombay High Court: Income Tax Appeal
No.682 of 2018
Prin. Commissioner of Income Tax
Vs. American Spring and Pressing works Pvt. Ltd
02nd Aug 2023
ITAT order upheld by High Court wherein ITAT had rejected
the jurisdiction of Prin. Commissioner (PCIT) u/s 263 since
AO took a possible view and his assessment could not be
treated as erroneous; where two views are possible and
the AO has taken one view with which the PCIT does not
agree, it cannot be treated as erroneous; ITAT’s finding
that PCIT could not have exercised its jurisdiction u/s 263,
has not been challenged, thus it is not permissible to go
into the merits of the case as decided by the AO.
LD/72/041
Delhi High Court: ITA 37/2019
Prin. Commissioner of Income Tax
Vs. ARN Infrastructure Ltd
27th July 2023
ITAT deleted the addition made by the Revenue on
the basis of the survey report containing the directors’
statement on oath disclosing the unexplained income,
which was upheld by the High Court (HC); Statement
recorded u/s 133A has no evidentiary value since the
concerned officer is not authorized to administer oath and
record a sworn statement and is in contradiction with the
statement recorded u/s 132(4); Copy of the survey report
was not furnished to the assessee and accordingly
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THE CHARTERED ACCOUNTANT
directors were not confronted with the contents of the
survey report; Addition cannot be sustained since it was
based solely on the statement recorded u/s 133A and
was not corroborated.
LD/72/042
Delhi High Court: W.P.(C) 12677/2018
Sh. Manujendra Shah
Vs. Commissioner of Income tax
18th July 2023
Delhi High Court (HC) quashed notice issued u/s 148
by holding that there was non-application of mind with
regard to applicability of section 50C and failure to secure
the material for arriving at the market value for estimating
cost of acquisition; AO had initiated reassessment by
noting that assessee did not disclose the full and true
value of the consideration; From the reasons recorded
by AO, it was evident that the real difference in LTCG
computed by AO and the assessee pertained to the
difference in Cost of Acquisition (COA) and not Sale
consideration; AO did not have material in possession
while initiating reassessment proceedings;
LD/72/043
Allahabad High Court: Writ Tax No. 829 of 2023
Chandra Bhan Vs. Union of India & Anr
18th July 2023
Notice u/s 148 was issued manually without the
Document Identification Number (DIN), which as per
the assessee was is in violation of CBDT Circular;
High Court ruled in Revenue’s favour; Assessee
participated in the proceedings and the reassessment
order was passed only after consideration of his reply;
Assessee acknowledged receipt of such notice and
no prejudice caused to the assessee by issuance of
manual notices;
LD/72/044
ITAT Hyderabad: ITA No 579/Hyd/2022
Nirajita Mitra
Vs. The Income Tax Officer
19th April 2023
ITAT directed CIT(A) to adjudicate assessee’s immunity
application u/s 270AA despite being filed beyond the
stipulated period of 30 days; Assessee had under-
reported foreign income in return of income, as per
assessment; The whole purpose of granting the
immunity to the Assessee is to give quietus to the
litigation in case assessee accepts and pays due
taxes; Although section 270AA requires assessee to
file an application within 30 days to the AO seeking
immunity from imposing penalty u/s 270AA, there is no
provision which prohibits filing of application after the
expiry of 30 days whereby an assessee was prevented
from filing it.
www.icai.org
639
LEGAL UPDATES
INDIRECT GST
TAXES
LD/72/045
[Writ Tax No. 200 of 2023, 09-10-2023]
[ALL HC] M/s BRIJESH KUMAR SINGH
vs STATE OF UTTAR PRADESH
In terms of section 75(4) of the CGST Act, once it has
been laid down by way of a principle of law that a person/
assessee is not required to request for “opportunity of
personal hearing” and it remained mandatory upon the
Assessing Authority to afford such opportunity before
passing an adverse order, the fact that the petitioner
may have signified ‘No’ in the column meant to mark
the assessee’s choice to avail personal hearing, would
bear no legal consequence
LD/72/046
[WPA/509/2023, 12-09-2023]
[Cal HC] DRB INFRASTRUCTURE PVT LTD vs
STATE OF WEST BENGAL AND ORS
The order passed without dealing with the objections
raised by the assessee and without giving reasons in
support of the conclusions reached in the order cannot
be said to be an adjudication order passed on the
merits of the case and is liable to be set aside.
LD/72/047
[W.P.No. 26457 of 2023 and
W.M.P.Nos. 25865 and 25867 of 2023,
11-09-2023] [Mad HC] M/s EAST COAST
CONSTRUCTIONS AND INDUSTRIES LTD vs
ASSISTANT COMMISSIONER (SERVICE TAX)
NUNGAMBAKKAM
When the assessee failed to respond to the notices
because they were uploaded in different sections in the
dashboard, the court directed GST officer to address
the issue arising out of the hosting of information in
the Menu in Dashboard for “View Additional Notices
and Orders” when already there is another drop Menu
for “View Notices and Orders”, which was all along
since inception used for communicating notices in
various forms and orders and remanded the matter for
consideration afresh
LD/72/048
[WP No.8869 of 2020, 14-09-2023] [MAD
HC] INFAC INDIA PVT LTD vs DEPUTY
COMMISSIONER OF GST AND
CENTRAL EXCISE
Where the Petitioner had enough credit of IGST which
could have been utilised towards the payment of CGST
and SGST liability instead of utilising ITC wrongly availed
in TRAN-1, the Court held that the levy of interest u/s 50
of the CGST Act is unnecessary as there is no loss to
the revenue.
NOVEMBER 2023 95
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LEGAL UPDATES
LD/72/049
[W.P. No. 22854 of 2023 And W. M. P. Nos. 22327
and 22328 of 2023, 17-08-2023] [MAD HC]
M/s SRI RENGA TIMBERS vs THE ASSISTANT
COMMISSIONER (ST) (FAC)
It is not on the part of the duty of the revenue to deny
the benefit that was otherwise legitimately available to an
assessee. Hence, even if there are mistakes committed
by the assessee in transitioning the said credit through
TRAN-1 at the time of filing of original TRAN-1 as well
as Revised TRAN-1, so long as the credit availed by
the assessee is legally correct, it should be allowed
and the mistakes committed by the petitioner may be
overlooked.
LD/72/050
[R/Special Civil
Application No. 5010 Of 2021, 15-09-2023]
[GUJ HC] PEE GEE FABRICS PVT LTD vs
UNION OF INDIA
Where the petitioner claimed a second refund application
to claim the balance portion of refund due to it as per rule
89(5) under ‘any other head’ category relying upon the
Circulars/Notifications
Significant Notifications and Circulars issued
DIRECT I. NOTIFICATIONS
TAXES
1. Government specifies 3 classes
of non-banking financial companies
(NBFCs) for the purposes of section
43B(da) as well as section 43D - Notification No.
79&80/2023, dated 22-09-2023
Section 43B and section 43D prior to amendment by
the Finance Act, 2023 used two erstwhile categories of
NBFC namely, Deposit taking Non-Banking Financial
Company and Systemically Important Non-Deposit taking
Non-Banking Financial Company. The Finance Act, 2023
amended section 43B and section 43D, to substitute the
words, “a deposit taking non-banking financial company
or systemically important non-deposit taking non-banking
financial company”, for the words “such class of non-
banking financial companies as may be notified by the
Central Government in the Official Gazette in this behalf”.
Accordingly, vide these notifications, Government has
specified 3 classes of the NBFCs as per RBI guidelines
contained in Circular DOR. CRE. REC. No. 60/03.
10.001/2021-22 dated 22.10.2021.
96 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
Circular No. 94/2019 dated 28-03-2019, the department
cannot reject the said application on the ground that the
assessee has filed a second refund application for the
same month which is not permissible in law.
LD/72/051
[Writ Petition (L) No. 22585 Of 2023, 31-08-2023]
[Bom HC] SAKET AGARWAL vs UOI
The petitioner challenged the communication dated
21 April, 2023 as issued by the respondent-State
Tax Officer (C-804), Nodal Division-I, Mumbai to the
Officer-in-Charge of the Central Depository Services
(India) Ltd in exercise of the powers under Section 83
of the Maharashtra State Goods and Services Tax Act,
2017. When on instruction, the AGP fairly stated that
the State Tax Officer would not have any jurisdiction
to issue such communication, hence, the impugned
communication dated 21 April, 2023 is being withdrawn
by the officer who had issued it. The Court directed to
issue the necessary intimations of withdrawal of such
communication to the Officer-in-Charge of the Central
Depository Services (India) Ltd. and the Petitioner and
disposed off the petition accordingly.
The detailed Notification can be downloaded from
the link below:
https://incometaxindia.gov.in/communications/
notification/notification-79-2023.pdf
https://incometaxindia.gov.in/communications/
notification/notification-80-2023.pdf
2. CBDT notifies changes to Rule 11UA in respect
of ANGEL TAX - Notification No. 81/2023, dated 25-
09-2023
Vide this Notification, the CBDT has amended
Rule 11UA to bring in necessary provisions due to
amendment in section 56(2)(viib) by the Finance Act,
2023. A few changes in Rule 11 UA are:
(a) A safe harbor of 10% variation in value has been
provided;
(b) Valuation methods for calculating the FMV
of Compulsorily Convertible Preference
Shares(CCPS) have also been provided.
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THE CHARTERED ACCOUNTANT
The notified Rule provides for expansion of the
valuation methodologies to include globally accepted
methodology and provide a broad parity to resident and
non-resident investors.
The detailed Notification can be downloaded from
the link below:
https://incometaxindia.gov.in/communications/
notification/notification-81-2023.pdf
https://incometaxindia.gov.in/Lists/Press%20
Releases/Attachments/1154/Press-Release-CBDT-
notifies-changes-to-Rule-11UA-in-respect-of-ANGEL-
TAX.pdf
3. CBDT notifies Rules and Form for report of audit
for inventory valuation u/s 142(2A) – Notification No.
82/2023, dated 27-09-2023
Vide Finance Act 2023, in order to ensure that inventory
is valued in accordance with the various provisions of
the Act, section 142(2A) was amended to enable AO to
direct the assessee to get inventory valued by a Cost
Accountant, nominated by the authority as specified.
Assessee is required to furnish the report of inventory
valuation in the prescribed form duly signed and
verified by the Cost Accountant. Accordingly, vide this
Notification, relevant amendments have been carried
out in Rule 14A and Rule 14B to make the above
provision operational. In addition, Form No. 6D (Form
for inventory valuation report) has also been notified.
The detailed Notification can be downloaded from
the link below:
https://incometaxindia.gov.in/communications/
notification/notification-82-2023.pdf
4. Procedure, format and standards for filling
an application for grant of certificate under Rule
28AA(4), for deduction of Income-tax at any lower
rate or no deduction of Income-tax u/s 197(1)
through TRACES – Notification No. 02/2023, dated
27-09-2023
Proviso to Rule 28AA(4) provides for issuance of
certificate for deduction of tax at lower rate, to the
person making such application authorizing him to
receive income or sum after deduction of tax at lower
rate, in cases, where the number of persons responsible
for deducting the tax is likely to exceed one hundred
and the details of such persons are not available
at the time of making application with the person
making such application, Rule 28AA(6) empowers the
DGIT(Systems) to lay down procedures, formats and
standards for issuance of certificates under proviso
to Rule 28AA(4). Accordingly, the DGIT(Systems) has
specified the procedure, format and standards for the
purpose of electronic filing of Form 13 with Annexure
- II and generation of certificate u/s 197(1) r,w, proviso
to Rule 28AA(4) through TRACES as per procedure
www.icai.org
641
LEGAL UPDATES
specified in this notification, which will be applicable
from 01.10,2023.
The detailed Notification can be downloaded from
the link below:
https://incometaxindia.gov.in/communications/
notification/notification-02-2023-27-09-2023.pdf
5. CBDT notifies Rule and Form for application for
exercise of option under u/s 115BAE(5) – Notification
No. 83/2023, dated 29-09-2023
The Finance Act, 2023 inserted section 115BAE which
provides that a new manufacturing co-operative society
set up on or after 01.04.2023, which commences
manufacturing or production on or before 31.03.2024
and does not avail of any specified incentive or
deductions, may opt to pay tax at a concessional rate
of 15% for AY 2024-25 onwards. Section 115BAE(5)
further provides that the concessional rate shall not
apply unless the option is exercised by the person
in the prescribed manner on or before the due date
specified u/s 139(1) for furnishing the first of the returns
of income for any PY relevant to the AY commencing
on or after 01.04.2024 and such option once exercised
shall apply to subsequent AYs. Accordingly, vide this
Notification, Rule 21AHA and Form No. 10-IFA has
been notified.
The detailed Notification can be downloaded from
the link below:
https://incometaxindia.gov.in/communications/
notification/notification-83-2023.pdf
6. Amendments in Rule(s) 114B, 114BA & 114BB
and substitution of Form No. 60 vide the Income-
tax (Twenty-fourth Amendment) Rules, 2023-
Notification No. 88/2023, dated 11-10-2023
Rule 114B prescribes transactions in relation to which
PAN is to be quoted in all documents for the purpose
of section 139A(5)(c). Rule 114BA prescribes various
transactions for the purposes of section 139A(1)(vii) and
rule 114BB lays down transactions for the purposes of
section 139A(6A) and prescribed person for the purposes
of clause (ab) of Explanation to section 139A. In exercise
of the powers conferred by clause (vii) of sub-section (1),
clause (c) subsection (5) and sub-section (6A) of section
139A, amendments have been carried out in Rule(s)
114B, 114BA and 114BB. Further, Form No. 60 (Form for
declaration to be filed by any person (other than a company
or firm) or a foreign company covered by the third proviso
to rule 114B, who does not have a permanent account
number and who enters into any transaction specified in
rule 114B) has also been substituted.
The detailed Notification can be downloaded from
the link below:
https://incometaxindia.gov.in/communications/
notification/notification-88-2023.pdf
NOVEMBER 2023 97
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LEGAL UPDATES
DIRECT II. CIRCULARS
TAXES
1. Extension of timelines for filing of
Form 10B/10BB and Form ITR-7 for the
Assessment Year 2023-24 – Circular No.
16/2023, dated 18-09-2023
Vide this Circular, the due date of furnishing of return of
income in Form ITR-7 for the Assessment Year 2023-
24 in the case of assessees referred to in clause (a) of
Explanation 2 to sub-section (1) of section 139 of the
Act, which is 31.10.2023, is extended to 30.11.2023.
The detailed Circular can be downloaded from the
link below:
https://incometaxindia.gov.in/communications/
circular/circular_no_16_2023.pdf
https://incometaxindia.gov.in/Lists/Press%20
Releases/Attachments/1153/PressRelease-CBDT-
extends-due-date-for-filing-of-Form-10B-10BB-and-
Form-ITR-7.pdf
2. Order u/s 119 clarifying an issue w.r.t. row
41 of Form No. 10B and row 28 of Form No. 10BB
regarding details of persons making substantial
contribution for AY 2023-24 - Circular No. 17/2023,
dated 09-10-2023
Vide this Circular, the CBDT has clarified that for the
purposes of providing details in (i) Form No. 10B in
the Annexure, in row 41; and (ii) Form No. 10BB in the
Annexure, in row 28, for AY 2023-24:
(a) the specified details (i.e. of persons making
substantial contribution) may be given with
respect to those persons whose total contribution
during PY exceeds Rs 50,000;
(b) details of relatives of such person, as referred to in
(a) above may be provided, if available.
(c) details of concerns in which such person, as
referred to in (a) above, has substantial interest
may be provided, if available.
The detailed Circular can be downloaded from the
link below:
https://incometaxindia.gov.in/communications/circular/
circular-17-2023.pdf
DIRECT III. PRESS RELEASES/
TAXES INSTRUCTIONS/OFFICE
MEMORANDUM/ORDER
1. More than 30 lakh Audit Reports filed
till 30.09.2023, on the e-filing portal of ITD – Press
Release, dated 02-10-2023
Vide this Press Release, the ITD has appreciated
taxpayers and tax professionals for making
98 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
compliances in time with respect to filing of Tax Audit
Reports (TARs) and other audit reports in Form No.
29B, 29C, 10CCB, etc. The e-filing Helpdesk team
has handled approximately 2.36 lakh queries from the
taxpayers in the month of September, 2023 supporting
the taxpayers and tax professionals proactively during
the filing period, helping them resolve any complexity
involved. The support from the helpdesk was provided
through inbound calls, outbound calls, live chats,
Webex and co-browsing sessions.
The complete text of the above Press Release can
be downloaded from the link below:
https://incometaxindia.gov.in/Lists/Press%20
Releases/Attachments/1155/Press-Release-More-
than-30-lakh-Audit-Reports-filed-till-30th-September-
2023-dated-02-10-2023.pdf
2. CBDT completes 1st week of Special Campaign
3.0 – Press Release, dated 11-10-2023
CBDT is conducting the Special Campaign 3.0 on
Swachhata within the offices of ITD located in various
parts of the country. The Campaign started from
02.10.2023 and will continue up to 31.10.2023. In the
first week of this campaign, 2 best practices have been
identified by the ITD. With an aim of increased focus
on public grievance redressal, the Hon’ble Finance
Minister Smt. Nirmala Sitharaman inaugurated a
digital e-learning course, on the Grievance Redressal
Mechanism in ITD, which has been uploaded on the
iGOT platform of Karmayogi Bharat. This course is
expected to build capacity of the officers and officials
of the Department in public grievance redressal.
The complete text of the above Press Release can
be downloaded from the link below:
https://incometaxindia.gov.in/Lists/Press%20Releases/
Attachments/1158/PressRelease-CBDT-completes-1st-
week-of-Special-Campaign-3-0-11-10-23-New.pdf
INDIRECT
TAXES GST
I. NOTIFICATIONS
1. Reporting of invoices on the IRP Portal
A time limit of 30 days has been imposed for reporting
of invoices including debit or credit note from the date
of invoice, or as the case may be, date of issue debit
or credit note on e-invoice portals for taxpayers with
Aggregate Annual Turnover (AATO) greater than or equal
to 100 crores. Hence, the taxpayers in this category will
not be allowed to report invoices older than 30 days on
the date of reporting.
This validation shall come into effect from 1st Nov, 2023.
einvoice1.gst.gov.in
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THE CHARTERED ACCOUNTANT

2. Mandatory 2 Factor Authentication
GST e-invoice portal has also mandated two factor
authentication (2FA) for all taxpayers with AATO above
Rs 20 Cr from 1st Nov, 2023. In order to implement this,
users are requested to register for 2FA immediately
and also create sub-users so that EWB activities are
managed without any problem.
LEGAL UPDATES
3. Establishment of State Benches of GST
Appellate Tribunal
Central Government, on the recommendation of the
Goods and Services Tax Council, has constituted the
following State Benches of the Goods and Services Tax
Appellate Tribunal:

einvoice1.gst.gov.in

S. No. State Name No. of Benches Location

1. Andhra Pradesh 1 Vishakhapatnam and Vijayawada

2. Bihar 1 Patna

3. Chhattisgarh 1 Raipur and Bilaspur

4. Delhi 1 Delhi

5. Gujarat
2 Ahmedabad, Surat and Rajkot
Dadra and Nagar Haveli and Daman
6.
and Diu

7. Haryana 1 Gurugram and Hissar

8. Himachal Pradesh 1 Shimla

9. Jammu & Kashmir

1 Jammu & Srinagar
10. Ladakh

11. Jharkhand 1 Ranchi

12. Karnataka 2 Bengaluru

13. Kerala
1 Ernakulum and Trivandrum
14. Lakshadweep

15. Madhya Pradesh 1 Bhopal

16. Goa
Mumbai, Pune, Thane, Nagpur,
3
Aurangabad and Panaji
17. Maharashtra

18. Odisha 1 Cuttack

19. Punjab
1 Chandigarh and Jalandhar
20. Chandigarh

21. Rajasthan 2 Jaipur and Jodhpur

22. Tamil Nadu

Chennai, Madurai, Coimbatore and
2
Puducherry
23. Puducherry

24. Telangana 1 Hyderabad

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644

LEGAL UPDATES THE CHARTERED ACCOUNTANT

S. No. State Name No. of Benches Location

Lucknow, Varanasi, Ghaziabad, Agra
25. Uttar Pradesh 3
and Prayagraj
26. Uttarakhand 1 Dehradun
27. Andaman and Nicobar Islands
28. Sikkim 2 Kolkata
29. West Bengal
30. Arunachal Pradesh
31. Assam
32. Manipur
Guwahati, Aizawl (Circuit), Agartala
33. Meghalaya 1
(Circuit), Kohima (Circuit)
34. Mizoram
35. Nagaland
36. Tripura
Locations shown as ‘Circuit’ shall be operational in iii) supply of actionable claims in casinos.
such manner as the President may order, depending
upon the number of appeals filed by suppliers in the 7. GST on advances received against the supply
respective States. of specified actionable claims

The detailed Notification can be downloaded from
the link below:
egazzete.gov.in
4. Special procedure to be followed by
manufacturers of Pan Masala and Tobacco products
to be effective from 1st January, 2024
Notification No. 30/2023-CT dt. 31.07.2023 specifying
the special procedure to be followed by a registered
person engaged in manufacturing of Pan Masala,
Tobacco, Cigarettes, Hookah etc., has been amended
to provide that the said special procedure shall become
effective from 01.01.2024.
Notification No. 47/2023-CT dt. 25.09.2023
5. Amendments made vide the CGST (Amendment)
Act, 2023 and IGST (Amendment) Act, 2023 have
become effective from 01.10.2023.
The Central Government vide Notification No. 48/2023-
CT dt. 29.09.2023 and Notification No. 02/2023-IT dt.
29.09.2023 has appointed 1st day of October, 2023,
as the date on which the provisions of the CGST
(Amendment) Act, 2023 and the IGST (Amendment)
Act, 2023 shall come into force.
6. Supplies notified under section 15(5) of the
CGST Act, 2017
With effect from 01.10.2023, the Central Government
vide Notification No. 49/2023-CT dt. 29.09.2023
has notified the following supplies the value of
which shall be determined in the prescribed manner
notwithstanding anything contained in sub-section (1)
or sub-section (4) of section 15:
i) supply of online money gaming;
ii) supply of online gaming, other than online money
gaming; and
With effect from 01.10.2023, Notification No.
66/2017-CT dt. 15.11.2017 has been amended to
provide that the registered persons who are engaged
in making supply of specified actionable claims as
defined under section 2(102A) of the CGST Act, 2017
shall be liable to pay GST on the advances received
for such supply.
Notification No. 50/2023- CT dt. 29.09.2023
8. Amendments in CGST Rules, 2017
The below-mentioned amendments have been made
in the CGST Rules, 2017 vide Notification No. 51/2023
– CT dt. 29.09.2023. The amendments shall become
effective from 01.10.2023 unless mentioned otherwise:
a) Rule 8 (Application for Registration) and rule 14
(Grant of registration to person supplying online
information and database access or retrieval
services from a place outside India to a non-
taxable online recipient or to a person supplying
online money gaming from a place outside India
to a person in India)
Rules 8 and 14 have been amended to provide
that any person supplying online money gaming
from a place outside India to a person in India shall
submit an application for registration, duly signed
or verified through electronic verification code, in
FORM GST REG-10, at the common portal, either
directly or through a Facilitation Centre notified
by the Commissioner. The registration shall be
granted in FORM GST REG-06, subject to such
conditions and restrictions and by such officer as
may be notified by the Central Government on the
recommendations of the Council.
b) Insertion of rules 31B (Value of supply in case of
online gaming including online money gaming)
and 31C (Value of supply of actionable claims in
case of casinos)

100 NOVEMBER 2023 www.icai.org


THE CHARTERED ACCOUNTANT
Rules 31B and 31C have been inserted in the
CGST Rules, 2017 with effect from 01.10.2023 for
determining the value of supply in case of online
gaming including online money gaming and
actionable claims in case of casinos respectively.
As per rule 31B, the value of supply of online
gaming, including supply of actionable claims
involved in online money gaming, shall be the
total amount paid or payable to or deposited
with the supplier by way of money or money’s
worth, including virtual digital assets, by or
on behalf of the player. Further, any amount
returned or refunded by the supplier to the player
for any reasons whatsoever, including player not
using the amount paid or deposited with the
supplier for participating in any event, shall not
be deductible from the value of supply of online
money gaming.
As per rule 31C, the value of supply of actionable
claims in casino shall be the total amount paid or
payable by or on behalf of the player for –
i) purchase of the tokens, chips, coins or tickets,
by whatever name called, for use in casino; or
ii) participating in any event, including game,
scheme, competition or any other activity or
process, in the casino, in cases where the
token, chips, coins or tickets, by whatever
name called, are not required.
However, any amount returned or refunded by
the casino to the player on return of token, coins,
chips, or tickets, as the case may be, or otherwise,
shall not be deductible from the value of the supply
of actionable claims in casino.
For the purpose of rules 31B and 31C, any
amount received by the player by winning any
event, including game, scheme, competition
or any other activity or process, which is used
for playing by the said player in a further event
without withdrawing, shall not be considered
as the amount paid to or deposited with the
supplier by or on behalf of the said player.
c) Amendment in rule 46 (Tax Invoice)
In cases involving supply of online money gaming,
the tax invoice issued by the registered person to
an unregistered person shall contain name of the
State of the recipient and the same shall be deemed
to be the address on record of the recipient.
d) Substitution of rule 64 (Form and manner of
submission of return by persons providing
online information and data base access or
retrieval services and by persons supplying
online money gaming from a place outside India
to a person in India)
Every registered person providing online money
gaming from a place outside India to a person in
www.icai.org
645
LEGAL UPDATES
India, shall file return in FORM GSTR-5A on or
before the twentieth day of the month succeeding
the calendar month or part thereof.
e) Amendment in rule 87 (Electronic Cash Ledger)
A person supplying online money gaming from a
place outside India to a person in India as referred to
in section 14A of the IGST Act, 2017 may make the
deposit in electronic cash ledger through international
money transfer through Society for Worldwide Inter-
bank Financial Telecommunication payment network,
from the date to be notified by the Board.
f) Amendments in Forms GSTR-5A and GST REG-
10
Form GSTR-5A (Details of supplies of OIDAR
services by a person located outside India made
to non-taxable online recipient (as defined in
Integrated Goods and Services Tax Act, 2017)
and to registered persons in India and details of
supplies of online money gaming by a person
located outside India to a person in India) has been
amended to give the effect to the amendments
relating to online gaming. Similarly, Form REG-10
(Application for registration of person supplying
online money gaming from a place outside India
to a person in India or for registration of person
supplying online information and database access
or retrieval services from a place outside India
to a non-taxable online recipient in India) has
been amended in order to give the effect to the
amendments relating to online gaming.
9. Taxability of specified actionable claims
Notification No. 01/2023 – CT(R) dt. 28.06.2017 and
Notification No. 01/2023 – IT(R) dt. 28.06.2017 have
been amended to bring into force the taxability of
specified actionable claims as defined in section 2(102A)
of the Act at the rate of 28% with effect from 01.10.2023.
Further, an explanation has been inserted specifying that
the words and expressions used and not defined in this
notification, but defined in the CGST Act, 2017; IGST
Act, 2017 and the UTGST Act, 2017, shall have the same
meanings as assigned to them in those Acts.
Notification No. 11/2023 – CT(R) dt. 29.09.2023 and
Notification No. 14/2023 – IT(R) dt. 29.09.2023
10. Supply of online money gaming notified as the
supply of goods on import of which, integrated tax
shall be levied and collected under section 5(1) of
the IGST Act, 2017
With effect from 01.10.2023, the Central Government
has notified the supply of online money gaming as
the goods on import of which integrated tax shall be
levied and collected under section 5(1) of the IGST Act,
2017 and not in accordance with the provisions of the
Customs Tariff Act, 1975.
Notification No. 03/2023- IT dt. 29.09.2023
NOVEMBER 2023 101
646
LEGAL UPDATES
11. Simplified registration Scheme for overseas
supplier of online money gaming
With effect from 01.10.2023, the Central Government
has notified the Principal Commissioner of Central Tax,
Bengaluru West and all the officers subordinate to him
as the officers empowered to grant registration in case
of supply of online money gaming provided or agreed
to be provided by a person located in non- taxable
territory and received by a person in India.
Notification No. 04/2023- IT dt. 29.09.2023
12. No IGST on ocean freight in case of import of
goods on CIF basis
The Supreme Court in the case of Union of India &
Anr. v. M/s Mohit Minerals Pvt. Ltd. Civil Appeal No.
1390 of 2022 dated May 19, 2022 has held that levy
imposed on the ‘service’ aspect of the transaction
is in violation of the principle of ‘composite supply’
enshrined under section 2(30) read with section 8
of the CGST Act. Since the Indian importer is liable
to pay IGST on the ‘composite supply’, comprising
of supply of goods and supply of services of
transportation, insurance, etc. in a CIF contract, a
separate levy on the Indian importer for the ‘supply
of services’ by the shipping line would be in violation
of section 8 of the CGST Act.
In line with the said judgment, following amendments
have been made in the IGST notifications to provide
that IGST will not be leviable on ocean freight under
reverse charge on CIF contracts of import of goods
by the Indian importers, w.e.f 1st October, 2023:
(i) IGST reverse charge notification (Notification
No. 10/2017-IT (R) dt. 28.06.2017) – In the table,
serial no. 10 and the entries relating thereto
have been omitted. Serial No. 10 pertained to
services provided or agreed to be provided by
a person located in a non-taxable territory to a
person located in a non-taxable territory by way
of transportation of goods by a vessel from a
place outside India up to the customs station
of clearance in India [Notification No. 13/2023-
IT(R) dt. 26.09.2023].
(ii) IGST rate notification (Notification No. 08/2017-
IT (R) dt. 28.06.2017) - In the Table, against serial
number 9 prescribing rate of 5%, in column (3), in
item (ii), the words “including services provided
or agreed to be provided by a person located
in non-taxable territory to a person located in
non-taxable territory by way of transportation
of goods by a vessel from a place outside India
up to the customs station of clearance in India”,
have been omitted [Notification No. 11/2023-
IT(R) dt. 26.09.2023].
102 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
(iii) IGST exemption notification (Notification No.
09/2017-IT(R) dt. 28.06.2017) – In the Table,
against serial number 10, in column (3), the
proviso has been substituted. Clause (ii) of
the proviso which pertained to services by way
of transportation of goods by a vessel from a
place outside India up to the customs station of
clearance in India received by persons specified
in the entry has been removed in the substituted
proviso [Notification No. 12/2023- IT(R) dt.
26.09.2023].
INDIRECT
TAXES CUSTOMS
I. NOTIFICATION
1. Extension of exemption available to
certain deposits from the provisions of section 51A
of the Customs Act, 2023
The effectiveness of Notification No. 18/2023-Customs
(N.T) dt. 30.03.2023 and Notification No.
19/2022-Customs (N.T) dt. 30.03.2022 which provides
for exemption to certain deposits from the provisions of
Electronic Cash Ledger (ECL) functionality as envisaged
under section 51A has been further extended to 30th
November, 2023 and 1st December, 2023 respectively
vide Notification No. 69/2023-Customs (N.T) dt.
27.09.2023 and Notification No. 70/2023-Customs
(N.T.) dt. 27.09.2023.
INDIRECT II. CIRCULAR
TAXES
1. Implementation of Section 16(4) of
IGST Act related to restriction on export
of certain goods on payment of IGST and
coverage under refund mechanism.
Notification No. 27/2023-CT dated 31.07.2023 has
made section 16(4) of IGST Act, 2017 effective
from 01.10.2023. In exercise of powers conferred
under sub-section (4) of section 16, Notification No.
01/2023-IT dt. 31.08.2023 has notified all goods and
services except products like pan-masala, tobacco,
hookah etc., that can be exported on payment of
integrated tax and on which supplier of such goods
or services may claim the refund of tax so paid.
Consequently, DG Systems CBIC has developed a
backend functionality to restrict the IGST refund route
for the goods as specified in the above notification.
Through the said functionality, changes have been
made in the system of filing shipping bills and the
amendment thereto, with respect to the commodities
mentioned in the said notification.
Circular No. 24 /2023-Customs dt. 30.09.2023
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 647

THE CHARTERED ACCOUNTANT

LEGAL UPDATES

FEMA Updates
FEMA

Summary Information on few Compounding Orders:

Sr. Party Name Nature of Contravention Date of Compounding

No. Order Fees ( ` )

1. Little Internet Contraventions under Regulation 13.1(2) and 13.1(4) 15-09- 1,49,79,067
Private of FEMA Notification No. 20® relating to delay in 2023
Limited reporting of allotment of shares in Form FCGPR and
delay in filing of Form FCTRS for transfer of shares.

2. Precision Contraventions under Regulation 16(1)(iii) of FEMA 04-08- 7,51,991

Camshafts Notification No. 120 relating to disinvestment 2023
Limited without obtaining valuation based on audited
financial statements of overseas entity.

3. HRK Para 6(1) of Schedule 9 of FEMA Notification No. 20 18-09- 5,72,931

Enterprises read with Regulation 13.1(7) of FEMA Notification 2023
LLP No. 20(R) relating to delay in filing of Form LLP1 for
reporting of foreign investment in LLP

(Matter on FEMA has been contributed by CA Manoj Shah, Mumbai, CA Hinesh Doshi, Mumbai and CA Sudha Bhushan, Mumbai)

www.icai.org NOVEMBER 2023 103

 The Institute of Chartered
Accountants of India
COMMITTEE ON
MSME AND STARTUP

“Enhancement of Startup Ecosystem”

MANTHAN
20th October - 10th February 2024
Follow Us:

MORE INFO VISIT US

startup@icai.in
www.startup.icai.org
 ORGANISED BY

#icaimsmesahyog
#icaimsmeniryat

140+
ICAI MSME Connect
CITIES

“Empowering MSMEs for a Thriving Tomorrow.”

Supported by

ICAI MSME
SAHYOG
22nd October - 10th February 2024

Supported by

ICAI MSME
NIRYAT
Jointly Organised by Committee for Development of International Trade,
Services & WTO and Committee on MSME & Startup, ICAI

7th November - 10th February 2024

Prospective Participant Follow Us:

MSMES RETAILERS & WHOLESALERS BANKS MSME INCUBATORS ACCELERATORS EXPORTER MORE INFO VISIT US

CHARTERED ACCOUNTANTS SIDBI NSIC DFO MENTORS BUDDY STARTUPS STUDENTS

msme@icai.in
+0120 3045994 #icaimsmesahyog www.msme.icai.org

Committee on MSME and Startup, The Institute of Chartered Accountants of India ICAI Bhawan, Plot No. A-29,Sector-62 NOIDA-201309, U.P
650

Global Professional Accountants Convention

Mahatma Mandir Convention Centre, Gandhinagar, Gujarat, India

Technical Program

Day One
24th November 2023 (Friday)
1500 - 1630 hrs Inaugural Ceremony

1630 - 1700 hrs Break

1700 - 1800 hrs Plenary Session-1
Collaboration & Networking: Building Global Firms & Making India as a Global Accounting Hub
Explore the concept of collaboration & networking and its role in transforming local firms into
global players. Discuss the competitive advantages that India offers as a global outsourcing hub for
accounting and bookkeeping services. The topic would emphasize on the role of networking as a
strategy tool for expanding internationally and achieving the vision of creating global firms.

1800 - 1830 hrs Keynote Address - 1: India’s Economic Resurgence: Empowering CAs for a Global Role
Discover how CAs can take centre stage in facilitating India’s economic growth, capitalizing on
evolving financial landscapes, and embracing global trends that redefine the profession. The speaker
will provide valuable insights into navigating the challenges and seizing the vast potential for CAs in
shaping the future of the Indian economy.
1830 - 1930 hrs Networking & Exhibition Break
1930 - 2200 hrs Cultural Event & Networking Dinner

Day Two
25th November 2023 (Saturday)
0830 - 1000 hrs Exhibition & Breakfast
1000 - 1100 hrs Plenary Session-2
Leveraging Technology: Accountants as Catalysts for Digital Transformation
The integration of emerging technologies, such as artificial intelligence, blockchain, and data analytics,
into accounting practices is the need of the hour. The session would focus on how accountants can
harness the power of technology to enhance financial analysis, improve decision-making, streamline
processes, drive innovation and act as change agents in the digital era.
1100 - 1200 hrs Plenary Session-3
Elevating Assurance Quality: Regulator Insights
The panel will discuss the importance of elevating assurance quality and brings together regulators to
discuss strategies for achieving higher standards of auditing and assurance.
1200 - 1215 hrs Break
1215 - 1245 hrs Keynote Address - 2: Amrit Kaal: Innovation in India’s Growth Story
Get valuable insights on the importance of innovation in driving India’s economic growth and achieving
its goal of becoming an economic superpower. Get to know how the government, businesses, and
individuals can work together to promote innovation in India.
1245 - 1315 hrs Keynote Address - 3: India’s G-20 Presidency-Key Takeaways Towards Economic Superpower
The address will emphasize on the importance of India’s G-20 Presidency. Uncover how the G-20
has supported India’s economic development, accelerating India’s journey to become an economic
superpower.
1315 - 1430 hrs Exhibition & Lunch

106 NOVEMBER 2023 www.icai.org

 651

1430 - 1530 hrs Parallel Tracks

Track A1 - Technology & Start up
Accounting and Finance in the Age of Generative AI
This session will provide a comprehensive understanding of how generative AI is transforming the
accounting and finance fields, the opportunities it presents, and the considerations for professionals
and organizations as they navigate this technological shift.
Track B1 - Emerging Avenues
Unlocking the Value: The World of Business Valuation
Explore the role of professional accountants in business valuation, mergers and acquisitions, and
investment decisions. Discuss valuation methodologies, best practices, and the demand for valuation
experts in a global business landscape.
Track C1 - Global Connect
Leveraging Global Opportunities: Etiquette, Communication & Legal Insights
The session will equip professionals with the knowledge and skills needed to thrive in a diverse business
landscape and will teach the participants how to navigate cultural differences and communication styles
when dealing with clients from different countries, thus facilitating smoother business interactions.
Track D1 - Professional Excellence
The Dynamics of Practice Management in Digital Age
This session will give an overview of how digital transformation is reshaping practice management
in the accounting and finance industry. Explore a range of automation tools and solutions available
to accounting professionals, including accounting software, workflow automation, and AI-powered
platforms.
1530 - 1545 hrs Break
1545 - 1645 hrs Parallel Tracks
Track A2 - Technology & Start up
From Startups to Unicorn: The Professionals Role in Scaling Success
Discuss how professional accountants contribute to the transition from startup to unicorn by
optimizing financial structures, controls, and reporting.
Track B2 - Emerging Avenues
Unveiling Forensic Accounting: Detecting Financial Irregularities
Highlight the critical role of forensic accountants in identifying fraud, investigating financial
irregularities, and providing litigation support. Discuss real-life case studies, methodologies, and the
growing demand for forensic expertise in various industries.
Track C2 - Global Connect
GIFT IFSC: A New Frontier for Financial and Professional Firms
GIFT IFSC i.e., India’s first offshore International Financial Centre is becoming the preferred Financial
Centre for inbound & outbound investments and also for setting up of Professional Firms to provide
services to such organizations having offices in GIFT City. The panel will discuss on the emerging
opportunities in GIFT IFSC for Professional Firms and how they can participate in India’s growth story.
Track D2 - Professional Excellence
Unlocking India’s Economic Potential: The Role of Robust Financial Reporting in Attracting
Global Investments
The panel will discuss the connection between robust financial reporting practices and India’s
economic growth by drawing FDIs and positioning the country as a significant global economic player
and towards becoming the world’s third-largest economy.
1645 - 1700 hrs Break
1700 - 1800 hrs Parallel Tracks
Track A3 - Technology & Start up
Securing Digital Transactions, Safeguarding Data: The Role of Professionals
In the rapidly evolving landscape of digital transactions, the role of professionals takes center stage
as guardians of financial data integrity and security. This panel discussion will delve into the critical
responsibilities and strategies employed by these experts to safeguard digital transactions, ensuring
the privacy and protection of sensitive financial information.

www.icai.org NOVEMBER 2023 107

652

Track B3 - Emerging Avenues

Navigating Insolvency and Restructuring: Opportunities for Accountants
Delve into the specialized field of insolvency and restructuring. Discuss the role of accountants in
managing financially distressed businesses, bankruptcy proceedings, and corporate recovery. Explore
the skills required to excel in this challenging yet rewarding domain.
Track C3 - Global Connect
Global Practice Expansion: Strategies for Serving Clients across Continents
Addressing the legal, tax and regulatory considerations that Indian CAs need to be aware of when
serving clients internationally. The session will deliberate on the essential qualities and skills Indian CAs
need to succeed in a rapidly changing international market.
Track D3 - Professional Excellence
Ethics and Integrity in Accounting: The Cornerstones of Trust
Emphasize the importance of ethical behavior and integrity in the accounting profession. Discuss
real-life ethical dilemmas, the application of ethical principles, and the accountant’s role in promoting
transparency and trust.
1800 - 1900 hrs Networking & Exhibition Break
1900 - 2030 hrs Hi-Tea & Cultural Event

Day Three
26th November 2023 (Sunday)

0830 - 1000 hrs Exhibition & Breakfast

1000 - 1100 hrs Parallel Tracks
Track A4 - Technology & Start up
Start-up Finance Essentials: From Seed Funding to Scale
Delve into the financial aspects of start-ups, covering funding strategies, financial modeling, and
managing growth. Learn from successful start-up CFOs and investors about the intricacies of financial
management in a start-up environment.
Track B4 - Emerging Avenues
Driving Sustainability Reporting & Social Audit: The Accountant’s Role
The session will explore the pivotal role of professional accountants in advancing sustainability reporting
and improving transparency through Social Audits. Participants will gain insights into the evolving
landscape of corporate responsibility, environmental stewardship, and societal impact assessment.
Track C4 - Global Connect
Global Opportunities and Insights: Perspectives from ICAI Overseas Chapters
Unique opportunity to interact with the Chairmen of ICAI overseas Chapters from various regions,
gaining valuable insights into the specific opportunities available for professional accountants in
different parts of the world.
Track D4 - Professional Excellence
Strengthening Public Financial Management: Building Trust through Accountability and Transparency
Explore how professional accountants play a vital role in strengthening public financial management.
Learn about their impact on the accountability and transparency in government operations. This
panel discussion will highlight effective strategies and best practices that build trust and promote
sustainable socio-economic growth.

1100 - 1130 hrs Break

1130 - 1230 hrs Parallel Tracks

Track A5 - Technology & Start up

Innovations in Fintech: Revolutionizing Financial Services
Explore the dynamic landscape of financial technology and its impact on the finance industry. Highlight
the emergence of fintech start-ups, trends in payment systems, digital banking, and how they affect
traditional financial services.

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 653

Track B5 - Emerging Avenues

Risk Management and Internal Controls in a Global Context
Highlight the significance of effective risk management and internal controls for businesses operating
in a global environment. Discuss the accountant’s role in assessing, mitigating risks, and ensuring
compliance with international standards.

Track C5 - Global Connect

Global Mobility for Indian CAs: Expanding Horizons
Highlight the mutual recognition of qualification agreements between ICAI and leading accounting bodies
worldwide. Discuss the advantages of global mobility for Indian CAs, including career advancement,
international exposure, and contributing to the global accounting community.

Track D5 - Professional Excellence

Taxation in a Global Context: Navigating Complexities
Explore the intricacies of international taxation, transfer pricing, and tax planning strategies. Discuss the
accountant’s role in optimizing tax structures while ensuring compliance with evolving tax regulations.

1230 - 1400 hrs Exhibition & Lunch

1400 - 1430 hrs Keynote Address - 4: Investing in Sustainable World

The address would focus on the importance of addressing the climate crisis, other environmental
challenges and the role of professionals for a sustainable future.

1430 - 1530 hrs Plenary Session - 4

Diversify
Explore the art of diversification and allocation to achieve optimal portfolio balance for maximizing wealth
creation. Keep yourself updated with the latest developments that may impact your investments. Learn
from the expert panel about the current trends and gain insights for developing effective investment
strategies for businesses and individuals.

1530 - 1600 hrs Break

1600 - 1700 hrs Plenary Session - 5

ICAI at 75: Pioneering Trust, Shaping the Future
Through storytelling and artistry, this session will focus on the illustrious 75-year journey of the Institute
of Chartered Accountants of India (ICAI). It weaves together the threads of trust, ethics, integrity and
excellence that have defined the institute’s legacy, all while embracing a forward-looking vision that
shapes the future of the profession.

1700 - 1730 hrs Closing Ceremony

* Disclaimer: The agenda is subject to change

www.icai.org NOVEMBER 2023 109

654

ICAI NEWS THE CHARTERED ACCOUNTANT

New Publications
Manual on Concurrent Audit of Banks
(Price: Rs. 350/-)
The Reserve Bank of India (RBI) has revised norms for concurrent audit in
banks in 2019 and mandated lenders should ensure that the concurrent audit
covers risk sensitive areas identified by them as per their specific business
models. The broad areas of coverage under concurrent audit shall be based
on the identified risk of the unit and must include random transaction testing
of sufficiently large sample of such transactions wherever required. concurrent
auditors will be appointed for a period of not more than three years. This
changing landscape in banking sector has put more emphasis on risk
management and control functions and made the role of concurrent Auditors
very important.
In view of the above, the Board of Internal Audit and Management Accounting
has issued this Technical Guide on Internal Audit of Not-For-Profit Organizations
(NPOs) which comprehensively deals with the peculiar aspects of NPO sector, including various regulatory
aspects and provides a step-wise approach for internal audit.
Significant features of the Manual are:
● provides guidance to members regarding critical issues related to concurrent audit of banks,
including redirecting the scope of concurrent audit to include risk-based audit approach to make it
more meaningful and effective.
● Updated by incorporating guidance into the impact of various latest circulars/ directions issued by the
Reserve Bank of India.
● Divided into three parts:
Understanding the Banking Business and its legal framework
Domain of Concurrent Audit
Concurrent Audit Checklist and Core Banking System
● Contains concurrent audit checklist based on 2019 RBI Guidelines.
● Includes chapters on important areas like, Treasury, Forex and Core Banking Solutions

Technical Guide on Internal Audit of Pharmaceutical Industry

(Price: Rs. 150/-)
The Indian pharmaceutical industry has grown at a high pace during the last
few years. The key challenges that pharmaceutical firms confront are regulatory
compliance, intellectual property issues, price constraints, innovation and
infrastructural concerns, skilled labour, and global competition. Chartered
Accountants may aid the Pharmaceutical Industry by planning and diverting risks
into opportunities, as well as guiding management in taking further action.

Considering this, the Board of Internal Audit and Management Accounting has
issued Technical Guide on Internal Audit of Pharmaceutical Industry to provide an
insight into the functioning of the Pharmaceutical Industry.

Significant Features of the Guide are:

● provide guidance on structure, history, regulatory framework, key drivers of
this industry.
● provides guidance on aspects involved in various stages of pharmaceutical industry and regulatory
framework.

110 NOVEMBER 2023 www.icai.org

 655

THE CHARTERED ACCOUNTANT

ICAI NEWS
● In-depth Understanding of technical aspects of Pharmaceutical Industry, such as, Drug Discovery and
Development Solutions and Contract Research and Manufacturing Services and Radiopharmaceuticals,
research and Development, Clinical Trial.
● describes risks associated with pharmaceutical industry and internal controls checklist for various
processes.
● contains illustrative checklist for internal audit of major areas of pharmaceutical industry such as
production planning and control, procure to pay, order to cash, hire to fire, employee expenses
reimbursement, expenses cycle, fixed assets, etc.

Online Order
Successfully register on the Centralized Dispatch System (CDS) portal of ICAI and place your order
against payment on www.icai-cds.org

Review & Monitoring Tool for ‘Standards on Auditing Compliance’

A comprehensive Review & Monitoring Tool has been developed to aid firms in
adhering to the ‘Standards on Auditing Compliance.’ This tool contains checklists
covering all the Standards on Auditing, enabling members to effectively ensure
compliance with auditing standards and to maintain sufficient and appropriate
documentation to evidence such compliance. It serves as a tracking mechanism
for monitoring the completion status, with the ability to flag areas of concern.
The progress of activities can be monitored by effectively using the “Work status” drop downs regularly
which would be summarised in the Dashboard. This compilation has been meticulously prepared, and users
are encouraged to derive maximum benefit from this checklist in practical situations.
Significant Features of the Tool are: -
● ‘Dashboard’ for review and monitoring the status of compliance of each SA.
● Convenient link of SAs and their Implementation Guide on single click.
● Broad and illustrative indicative goals to be accomplished.
● Detailed checklist for each SA separately.
● Reference of working papers for effective audit documentation.
Link for downloading the Review & Monitoring Tool for ‘Standards on Auditing Compliance’:
https://forms.gle/mcXJdMRv4NfZQBKi8
Utility on Engagement Letters
The ‘Utility on Engagement Letters’ has been developed to streamline the
process of generating engagement letters for clients. This utility serves as
a valuable addition to the audit process, with a primary focus on enhancing
efficiency, ensuring compliance, and ultimately improving the overall quality of
audits. It allows easy customization of EL Templates (Word file).
This utility can be used by the Auditor and Audit Firm to generate ELs for
Tax Audit and Statutory Audit of Listed Entities, Unlisted Entities with Internal
Financial Controls and Unlisted Entities.
Significant Features of the Utility are: -
● Aimed at simplifying the creation of engagement letters for assurance clients.
● Seamlessly generates multiple engagement letters with a single click.
● Facilitates the maintenance of a centralised database of assurance clients.
● EL templates have been prepared separately considering individuals, proprietors and firms / LLPs as
auditors.
● Beneficial for Peer Review processes and ensuring that engagement letters are issued to all clients.
● Maximises productivity through time-saving measures and enhanced precision, allowing auditors to
focus on what truly matters.
Link for downloading the ‘Utility on Engagement Letters’:
https://forms.gle/zB5Qzo5T5GnCZpzq8

www.icai.org NOVEMBER 2023 111

 657

THE CHARTERED ACCOUNTANT

Business Standard
ICAI signs MoU with J-K govt to promote skill development:
Officials
The MoU was signed in the presence of Jammu and Kashmir
Lieutenant Governor Manoj Sinha
1st October 2023
A Memorandum of Understanding (MoU) was signed
between the State Taxes Department, Government of Jammu
and Kashmir, and the Institute of Chartered Accountants of
India (ICAI) in Srinagar on Saturday, an official statement said
on Sunday.
The MoU was signed in the presence of Jammu and Kashmir
Lieutenant Governor Manoj Sinha.
ICAI IN MEDIA
“The MoU aims to enhance cooperation and collaboration in
various areas, including capacity building, skill development,
and knowledge sharing,” an official statement added.
As per the statement, it seeks to leverage the expertise and
resources of ICAI to strengthen the taxation system in the state
and promote transparency and efficiency.
The signing of the MoU signifies the commitment of the
State Taxes Department and ICAI to work together to promote
compliance with tax laws and ensure fair and equitable taxation
practices, it said.
“It will help in building a robust tax administration system
and improving taxpayer services,” the statement added.

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658
ICAI IN MEDIA
Institute Of SocialAuditors of India (ISAI)
Holds Its First Annual General Meeting
7th October 2023
The Institute of Social Auditors of India (ISAI) successfully
concludes its first-ever Annual General Meeting in Mumbai. The
AGM was attended by Dr. P C Jain, Chairperson, ISAI, CA. Aniket
Sunil Talati, Director, ISAI & President, ICAI, CA. Ranjeet Kumar
Agarwal, Director, ISAI & Vice-President, ICAI, CA. (Dr.) Sanjeev
Kumar Singhal, Director, ISAI & Central Council Member, ICAI,
CA. Priti Paras Savla, Director, ISAI & Central Council Member,
ICAI, Shri Yatrik Vin, Independent Director, ISAI, Shri Hemant
Gupta, Independent Director, ISAI, Shri Raymond D’souza,
Independent Director, ISAI and CA. (Dr.) Jai Kumar Batra,
Secretary ICAI & CA. (Dr.) Debashis Mitra, Immediate Past
President, ICAI.
The company was formed in the preceding year and since then it is
continuously making a positive impact in the area of social audit.
Dr. P.C Jain, Chairperson on the occasion of first AGM, addressing
the members and stakeholders said, “The Institute of Social Auditors
of India has been incorporated to carry out the functions of a Self-
Regulatory Organization under the aegis of ICAI and is the leading
institution for regulation and development of Social Auditors in an
independent and transparent manner sub-serving the public interest
and also to protect the interest of various stakeholders in the social
audit process in a judicious and optimal manner.”
On October 7, 2022, The Institute of Chartered Accountants of India
(ICAI) formed a Section 8 company – “Institute of Social Auditors
114 NOVEMBER 2023
THE CHARTERED ACCOUNTANT
of India (ISAI)”, with a prime objective to produce independent,
ethical and world-class social auditors’ profession responding to
needs and expectations of the stakeholders.
On this occasion CA. Aniket Sunil Talati, President ICAI &
Director, ISAI said, “ISAI aims to become not only the largest but
truly the best globally recognised Institute of Social Auditors with
an objective to create a positive impact on the society”
During the meeting, CA. Ranjeet Kumar Agarwal, Vice- President
ICAI & Director, ISAI appreciated the increasing numbers of
Social Auditors registered/enrolled with ISAI and ensured better
opportunities to the members of ISAI.
Aligning with the sustainable development goals, ISAI has earlier
issued 16 audit standards on social audits, making India the first
country in the world to have social impact assessment standards.
These social audit standards (SAS) will provide the social
auditor with the necessary guidance about independent assurance
engagement on the impact assessment, including the audit steps
and procedures that should be applied while carrying out social
audits. For more info the website of ISAI can be accessed at http://
isai.ca.in/.
ISAI also conducts an Online Training Course on “NISM Series
XXIII: Social Auditors Certification Examination” to prepare the
members of ICAI for the “NISM Series XXIII: Social Auditors
Certification Examination”. After qualifying for the NISM Series-
XXIII: Social Auditors Certification Examination, the applicant is
required to enroll with the ISAI on a separate registration portal
http://registration.isai.ca.in.
Till date ISAI has enrolled/registered 426 members out of which
376 members are qualified Chartered Accountants, 23 members are
qualified Company Secretary, and 3 members are Cost Accountants.
Also, ISAI has registered 24 members having qualifications other than
CA/CS/CWA after following the due process of verifying their years of
relevant work experience in the development sector.
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