Auditors and Advertisement? Even a few months ago this would have been blasphemy to most accountants. In the past, accounting professionals were not even allowed to advertise their existence as a professional, let alone the services rendered by him and this was strictly interpreted.
A case in example is that of an eminent past President of the Institute who was hauled up for severe disciplinary action, since the biographical notes of the author in the book he had written, mentioned that he was practising as a professional in his own name.
However, in a dramatic break from the prison of the past, the current young council of the Institute of Chartered Accountants (ICAI), in a landmark announcement this month, permitted Chartered Accountants to advertise and notified guidelines for this.
Prohibition of advertising was warranted in an age when the profession was small, the service offerings and capabilities were uniform throughout the profession and a CA was like a family general practitioner. With the profession's strength rapidly approaching the two lakh figure; portfolio of services and capabilities varying from firm to firm and clients seeking industry and subject matter specialism; not allowing advertising amounts to denial of the right to information to a consumer and curtails his freedom to make an informed choice. It also militates against the young professional who is unable to actively build his own brand as against already established brands.
However, all said and done accounting is a serious profession. Hence a permission to advertise cannot be a carte blanche for frivolity, flippancy, or misrepresentation. It should never ever raise false expectations – either from the profession or from the individual service provider. Hence it is understandable that the ICAI will tread cautiously. This seems evident in the guidelines, when in a relic from its regulatory past the ICAI has tried to prescribe the maximum font size as 14 for advertisements.
Where these guidelines fall significantly short of regulatory expectation worldwide is that these guidelines specifically prohibit disclosure of names of clients. Further, the guidelines would not enable a Chartered Accountant firm to disclose their total billing and specifically their fees from audit assignments.
This is directly in conflict with the requirements in force (e.g. EUs 8th Directive) and elsewhere which mandate that all firms of auditors must disclose in their public transparency report the names of all public interest entities that they audit as well as their total earning, indicating separately the amount of earnings from audits conducted by them.
This would lead to a situation where Indian audit firms would not be able to comply with these international requirements for transparency reports and thus would not be allowed to register in such jurisdictions. This would effectively disentitle Indian audit firms from conducting audits and issuing reports for Indian companies which are registered on Exchanges in Europe.
While advertising in the profession requires to be regulated, the broader question which one must keep in mind is that it is the ICAI's duty to ensure delivery of quality services; to ensure that firms invest in quality and expertise; to assure that professionals deliver quality services to clients, thereby uplifting the image of the profession at large. This has to be done by strongly investing in a robust system of quality review and inspection and taking visible action to enforce quality standards in the profession. This would be the greatest advertisement for the profession.
In today's time and place, it is not the duty of the ICAI to ensure equitable distribution of available work – the market place is competent to do that and work would find its own levels in the market place, based on different requirements of the consumer including price sensitivity, capability and the consumer's perception of the value that he is going to get from his service provider.
Accordingly, the Institute should believe in the maturity of the market and focus more on its critical role of maintaining quality. It's encouraging to see recent steps like the agreement in principle to permit Chartered Accountants to form multidisciplinary practices; relaxation in the advertisement guidelines and strengthening the peer review and financial report review systems. These are indication that the ICAI is moving in the right direction. But there is a much greater need for strengthening the pace of reform and fast forwarding the integration of the Indian profession with its global counterpart.
This article appeared in the 23 June 8 edition of Business Standard, which is available at this link.
