Think Twice to advise CA as career, to start pracice, to apply Bank Concurrent Audit/to participate in Tenders

Think Twice- to advise a student to pursue CA, to start/opt Practice, to Apply Bank Concurrent Audit/ to participate in a Tender

CA Raghavendra Prasad M.

Dear CA,

I qualified CA in 1985. After 30 years , -----

1. Before advising any student to Join CA Course,

I have been explaining the Opportunities for a Practicing CA and Employee CA duly drawing Comparison of 1985 and 2015.

Employment: 2015>At present majority are opting for employment. In 1986, first I applied for Employment in a Public Sector Company as well a Professionally managed, diversified, Listed Private Sector company. Both paid me 1st Class Train fare and Lodging , Boarding for attending interviews at New Delhi and Nagpur respectively . Public Sector Top officials who interviewed assured me that the Salary Scales are under revision and I can expect more than the Scale advertised . Present: ICAI has taken the initiative of Capmus Selections, good initiative. Before that for some years , Newly Qualified has to apply to different companies, incur travelling, lodging and boarding from pocket besides – one date ,

2 or more companies at different places – impossible to attend – may not get the employment in which interview attended and missed the other company also , due to absent. 2. Practice: In 1985 majority opted for practice. Some of my good friends working in Public Sector Banks, Public / Private Sector Undertakings quit the employment , started their own practice. Section 44AB of the Income Tax Act, 1961 gave good professional opportunity , differentiated CAs , particularly in mofussil/taluk / district head quarters from ITPs and Tax Advocates. Sunrise Profession.

I try to be an Optimist but not a pessimist , -----

Recent Observations: Practicing son/daughter opting for employment. Leading South Indian CA Firm branch –in-Charge , an MBA from USA and also a CS , good academic record, quit practice and opted for employment after more than 2 decades practice. Competition Commission Of India. Tendering System .

News items CAs quoting as low as Rs 45 for Audit of a Sarva Siksha Abhiyaan account in AP , Rs 100 for Audit of a Village Account in MP. Recently, I attended Technical and Fiancial Bid opening of a State Government Undertaking.

The Minimum Bid is Rs 2,00,000. Out of about 120 Bids , about 100 are for the Minimum Bid and one is for Rs 50,00,000 some are even below Minimum Bid. The GM , a CS/CMA, informed that for a No Profit/No Loss situation, Bid has to be for a Minimum of Rs 4,00,000 and in 2nd Year there may be some surplus as Study of organization helps saving man days .

He wondered , CAs are trying through Politicians do it even for Rs 50,000 and For Free also stating they will have Experience in their Resume.

We are doing, along with 2 digit number of CA firms, Internal Audit of a State Government Undertaking and Fees last REVISED more than 6 years Ago. Inflation ? The Companies Act,2013 – but for some changes by Companies(Amendement) Act,2015 , some Rules , Forms modified, 8 Member committee appointed , a Ray of Hope, …???

3. A large Bank called for Applications for Allotment of Concurrent Audit. In my opinion, better to Think Twice , to apply this. We may not get Fees and No Wonder , if we end up paying to the Bank. I herwith attach the Fee Cuts , and a Summary is as follows: Fees as per Scheme :Rs 30,000 per Month. Sl No Nature of Lapse/Shortcoming Measure Penalty-Rs 1 Audit Staff absent for 6 days 6days* Rs 1,000 *2 12,000 2 Leakage not pointed in time Max 20% of Fees 6,000 3 Lacunae in Systems not pointed out Max 5% of Fees 1,500

4 Frauds not detected Max 25% of Fees 7,500

5 Scrutiny failure Max 5% of Fees 1,500

6 Delay in submission of report Max 10% of Fees 3,000 31,500 End of the Month, CA to pay ? Face the threat of Termination ? Attachment: SN Coverage Area Scope of work expected from Service Provider /CA Firm Quantum of Measurement Penalty to be imposed (For Service Provider / CA Firm)

1 Attendance at The Work Area Attending branch/unit on daily basis, by Representative of the Service Provider /CA Firm, and 2-3 times a week by the Partner of the Firm. Days of Absence in a month in attending the branch/unit

(i) by the representative of the Service provider / Firm or

(ii) by the Partner of the Firm Twice the proportionate remuneration of the month on a pro-rata basis for the days of absence. Eg.30 days in a month; Remuneration of Rs.30000/- p.m. with an absence of 2days:Penalty to be charged : Rs.2000x2= Rs.4000.

2 Detection of Income Leakage On a day to day basis income leakage, if any detected, to be reported. Non-detection/ non-reporting / short recovery of income leakage from the date it becomes due within a period of 2 weeks.

The penalty to be levied is on account of opportunity loss for the Bank. For Non-detection/ nonreporting: 1% of the amount, in the area of incomeLeakagenotdetected/ reported. i.e.

(i) Processing Fee

(ii) Upfront Fee

(iii) BG/LC Comm.

(iv) Locker rent etc., (Overall cap for both not to exceed 20% of monthly remuneration). Eg. Processing Fee of Rs. 1 lac.

Is identified by an Auditor other than CA. after 2 weeks of its becoming due. Penalty will be Rs.1000 for one instance.If such instances are more, then overall cap of 20% of remuneration i.e.Rs.6000 (20% of 30000) to be charged.

3 Detection of Major lacunae in the conduct of the account, systems& procedures etc., Timely detection of major lacunae. Nondetection of major lacunae as enumerated in the CRM Value Statements of WBCAS. Rs.250/- per major lacunae in an account with a maximum penalty of 5% of monthly remuneration.

4 Failureto comment on Frauds, which maycause loss to the Bank. Detection/ Reporting of Fraud. Non detection/ not reporting of Fraud arising on account of failure in implementation of systems & procedures and security lapses. 10% of monthly remuneration per instance, with a cap of 25% of monthly remuneration.

5 Detailed Scrutinyof Accounts and submission of observations. Detailed Scrutiny of Accounts within a reasonable time and submission of observations online on a daily basis. Detailed scrutiny of accounts by commenting as per Value Statementsmentionedin WBCAS, if not done: Eg. All accounts within 3 months and thereafter once, at the time of renewal/ review/ new sanction; Rs.250/- per major lacunae in an account with a maximum penalty of 5% of monthly remuneration

6 Submission of Monthly / Qly. Concurrent Audit Reports MonthlyReportstobe submitted within a week of the succeeding month to the BM/HeadoftheUnit. Thereafter, with their remarks to RM/DGM (BO) within 2 week of the succeeding month of report. Non submission as per schedule.

Non Submission: 10% of Audit Fee p.m. Non submission by over 3 months: Termination of the Contract giving one Month’s notice. Delayed Submission: Rs.250/ per day till submission. (With a overall cap of 10% of monthly remuneration p.m.) 7 Unacceptable delay in the performance Should be done in accordance with the time schedule specified in the Agreement. Identified areas of deficiency in performance:

(i) Partner ‟s not attending Termination of Contract, by giving a month‟s notice, as per Service Level Agreement SLA). of obligations. branch/ unit 2-3 times a week;

(ii)Non-deputation of representative every day;

(iii)Non-submission of Reports;

(iv) Non-detection of Income leakage in time, resulting in opportunity loss; &

(v) Non-detection/reporting of Frauds.

(vi) Poor Quality of Reports.