Global Developments in the Accountancy Profession CA K

Global Developments in the Accountancy Profession CA K. Raghu Past President – ICAI , Board Member of IFAC

Accountancy Profession : Global Perspective • The Accountancy Profession contributes USD $ 575 billion annually to the global economy. ( Report published by IFAC – Nexus-2). • The Global Accountancy sector comprises of traditional financial accounting services, audit and taxation services , business advisory services, business consulting services and management consulting services. • Accountants offer their services in Corporates, Government departments, NGO’s , domestic accounting firms and multi-national accounting firms. • Profession is becoming truly global with a common reporting language and cloud accounting platforms. • Accounting services are now being provided across borders by leveraging on technology.

Accountancy Profession : Global Perspective • According to the Survey of ACCA, 38% of the participants give a higher rating claiming that the Accountancy Profession has a key role in delivering public value to the society after the Medical Profession • Finding of the survey is as follows :

Accountancy Profession : Global Perspective • The report published by the IFAC titled as “ Nexus 2 : The Accountancy Profession – A Global Value Add “, provides the data on :

Accountancy Profession : Role of IFAC • International Federation of Accountants (IFAC) is the world wide organization for the accountancy profession. • Comprises of 164 professional accountancy organizations in 125 countries. • Represents more than 2. 5 Million accountants in Public Practice, industry and commerce headquartered in New York. • Involved in setting professional standards in a number of areas, including auditing , public sector financial reporting, accountancy education and professional ethics. • Actively addresses on matters of public interest for the global profession with several international governmental and regulatory organizations.

Accountancy Profession in India • Fast pace of growth in the Indian economy has created a huge demand for Professional Accountants since the last two decades. • The move by the Government towards a cashless economy post de-monetization will create further opportunities for Accountants • India is emerging as a global hub for accounting professionals due to talented manpower. • The Institute of Chartered Accountants of India (ICAI), the world’s second largest professional accounting body has been actively engaged in developing & contributing to the growth of the accountancy profession in India. • Convergence to IFRS in India and the new Companies Act, 2013 has created the need for new generation accountants with the knowledge of global reporting standards. • The introduction of Goods and Service Tax (GST) will further drive the need for accountants in India.

International Financial Reporting Standards • Increasing complexity of business operations and globalisation of capital markets make mandatory a single set of high quality reporting standards. • IFRS is a single set of high quality, understandable and enforceable global accounting standards. • “Principle based" set of standards which are drafted lucidly and are easy to understand apply. • Users of the statements are no longer limited to a single country. • Need for a uniform financial reporting system has been felt for preparing comparable and globally understandable financial statements.

International Financial Reporting Standards • The International Accounting Standards Committee(IASC) was formed in 1973 being the First International Standard Setting Body. • Standards issued by IASC were named International Accounting Standards(IAS). • IASC was reorganized in 2001 and became International Accounting Standards Board and issued standards in the name of IFRS.

IFRS ‘Big Picture’ from 138 countries Number of jurisdictions surveyed Region In the region That require IFRS for all or most domestic publicly Accountable entities That require IFRS as % of total jurisdictions in the region That permit or require IFRS for at least some (but not all or most) domestic publicly accountable entities That neither require nor permit IFRS for any domestic publicly accountable entities Europe 42 41 98% 1 0 Africa 20 16 80% 1 3 Middle East 07 06 86% 1 0 Asia-Oceania 32 24 75% 3 5 Americas 37 27 73% 8 2 Total 138 114 83% 14 10 As % of 138 100% 83% 10% 7%

Benefits of shifting to IFRS environment Ø Convergence with IFRS would result into uniform accounting principles, which would make v financial statements comparable boosting investor confidence and v help companies to raise capital from Foreign Markets at lower cost. v Consolidation of Financial Statements of the Subsidiaries with the Parent Foreign Companies Ø Burden of Financial reporting would be reduced foreign listed companies. Ø IFRS reporting provides an impetus to cross-border Acquisitions and Mergers

IFRS in India • In 2015, Ministry of Corporate Affairs has notified 39 IND AS. • IND -AS are the standards convergent with the IFRS & IAS. • IND – AS is currently being implemented by all Corporate having Net worth of Rs. 500 Crores or more and from 1 st April 2017 IND –AS will be implemented by all listed companies and un-listed companies having net worth of 250 Crores or more • IFRS will usher in increased transparency & greater accountability.

Cloud Computing • Storing accounting data on remote servers – making geography unimportant. • You can work on the accounting information from anywhere – your office, your home, at the airport. • Cloud Computing gaining acceptance around the world. • Cloud Computing enables you to work seamlessly from multiple locations without huge investments. • Mid to large size companies are embracing Cloud based technologies to leverage on lower costs.

Cloud Computing • Cloud Computing is used by the Accounting firms and business entities to store and process their data in third - party data centers. • It allows accountants to avoid up – front infrastructure costs and concentrate on delivery of service. • Maintenance of Cloud Computing applications is easier. • Cloud Computing performs the task of resource pooling. • It is a much secured platform since, cloud computing services are offered by IT service industry.

e. Xtensible Business Reporting Language(XBRL) • Open International Standard for digital business reporting. • XBRL specification is developed and published by XBRL International Inc. • Used in more than 50 countries around the world. • Used to define, prepare and exchange reporting information across organizational boundaries. • Uses XML Syntax and related technologies such as XML Schema , XLink, XPath and Namespaces. • XBRL format, simplifies the way people can use share, analyze and add value to the data. • XBRL makes the data, machine readable with the help of Two documents – Taxonomy and XBRL Instance.

Application of XBRL • Over the last 10 years, various regulators such as Securities and Exchange Commission (SEC) in the United States, United Kingdom’ s HM Revenue and Customs (HMRC) and Companies house in Singapore has required its companies to use it. • The Ministry of Corporate Affairs (MCA) had issued circulars mandating certain companies to file their Financial Statements from the Year 2010 -11 using XBRL Format.

Forensic Accounting and Fraud Detection • Every Financial Crisis or Corporate Scandal leads to revelations of accounting failures and a call for a new wave of regulation. • Under conditions of severe stress that the fundamental unsoundness of some financial practices are revealed. • Warren Buffet famously said in the wake of the technology crash of 2000 “ you find out who is swimming naked when the tide goes out”.

Need for Forensic Accounting • It has been gaining huge importance due to the increasing frauds and scams which took place in the recent past. • Major Scams and Frauds in India in the recent years : Scams and Frauds Year Losses Suffered (Rs. ) Harshad Mehta Securities Market Scam 1991 5, 000 Crores Fodders Scam 1992 950 Crores The UTI Scam 2001 4, 800 Crores UP Food Grains Scam 2003 35, 000 Crores Satyam Scam 2008 10, 000 Crores The 2 G Spectrum Distribution Scam 2008 1, 75, 000 Crores Sahara India Pariwar Investor Fraud Scam 2010 25, 000 Crores Coalgate Scam 2012 1, 85, 600 Crores Sarada group Financial Scandal 2013 20, 000 – 30, 000 Crores

Forensic Accounting and Fraud Detection • Looking beyond the numbers and deal with the business reality of a situation. • Frequently used in fraud cases. • Combines criminal investigation skills with financial auditing skills to identify financial criminal activity from within or outside the organization. • Prevention, Detection and recovery activities to investigate terrorism and other criminal activity. • Restores downgraded public confidence • Ensures the integrity and transparency of Financial Statements.

Big Data and Analytics • The Process of examining the large data sets containing a variety of data types. i. e. Big Data. • It uncovers hidden patterns, unknown correlations, market trends, customer preferences and other useful business information. • Big Data has the potential to transform every aspect of business. • There is potential to use intelligent systems, data mining and predictive analytics to exploit the repositories of ‘big data’ that firms are amassing and as a result transform both the operational and interpretative elements of accountancy.

Big Data and Analytics • In 2012, the amount of information stored worldwide exceeded 2. 8 zeta bytes, which is expected to be 50 X larger by 2020. • By 2016, the cumulative size of all the world’s data centers is expected to exceed 16, 000 acres. • Traditional data processing applications are inadequate for Large or Complex data sets. Challenges like analysis, capture, data curation, search, sharing, storage, transfer, visualization, and information privacy could be resolved by use of Big Data Analytics. • An estimated 33% could be useful if appropriately tagged analyzed but actually analyzed = 0. 5%.

Big Data and Analytics

Big Data and Analytics • Improves understanding of market conditions, forward planning and risks. • Potential to increase business effectiveness and lower process costs. • Explore ways to manage the increasing volume and complexity of the data to be analyzed and audited.

Integrated Reporting • Integrated Reporting seeks to provide stakeholders with additional information to help them make more informed assessments of companies and their long term prospects. • International Integrated Reporting Council - IIRC is a body setup to oversee the creation of a globally accepted Integrated Reporting framework. • Capital market stakeholders are finding it valuable when companies provide information on environmental, social, and governance issues impacting their businesses. • Stakeholders are increasingly considering internal and external non-financial factors, such as resource scarcity or demographic shifts, when assessing companies’ long-term prospects.

Artificial Business Intelligence • The capacity of machines and software to create and exhibit intelligencebrings with it promise and concern. • Artificial Intelligence could become an invaluable partner for the accountancy profession. • Challenges are plenty since professional judgement cannot be fully automated.

GLOBAL CHALLENGES

Managing Change • Complex and dynamic business environment. • Accounting professionals need to quickly adapt to this change. • Globalization, Technological Advances, Regulatory changes need to be embraced with an open mind.

Borderless World • Due to advent of technology and globalization, the world today has become a global village. • Business today spans national borders and we are operating in a borderless world. • Accountants should learn to deal with multiple accounting systems.

Changing expectations of Stakeholders • Professional accountants working in business are typically considered serve four different roles : as value creators, enablers, preservers, and reporters • With the increased frauds and corporate scandals , reporting on Internal Financial Controls has also been imposed as a requirement under the Companies Act, 2013. • Accountancy Professionals have a huge responsibility of promoting strong Corporate Governance. • Corporate Governance will enhance the credibility of any organisation. • Use of Technology has paved way to ERP implementation , faster performance of accounting functions, better reporting , enhanced internal control system.

Your role in encouraging Accounting as a Career • With the shortage in the supply of manpower in the area of Accountancy profession, there is a strong need for better quality accounting professionals. • Accountancy professionals should adapt themselves to changes and should be willing to take up global careers. • Imparting high quality accounting education to students shall ensure better skill sets among the budding accountancy professionals. • ICAI aims to encourage young Indian students to consider accountancy as a career.

Conclusion • The accountancy profession in India is growing fast and is now a popular profession. • We just witnessed the Technology Revolution and now its time for us to witness the Accounting Revolution • A great opportunity for India to make its mark on the international accountancy map since it has abundant trained accounting professionals and can emerge as the Global Accounting Hub. • Mahatma Gandhi Says “ Consciously or unconsciously, every one of us does render some service or other. If we cultivate the habit of doing this service deliberately, our desire for service will steadily grow stronger and will make not only our own happiness but that of the world at large. ”

Thank you CA K. Raghu cakraghu@kraghu. com