Anchor: I should also mention here that we had two other members, who were going to join us at this panel Uttam Prakash Agarwal, President of ICAI and OP Vaish, Government Nominee at the ICAI counsel. Unfortunately Mr Agarwal disapproved of the fact that we had another counsel member here on this discussion and decided to leave the discussion seconds before we started.
Uttam Prakash Agrawal, President, ICAI said, “When the President is already with you I do not want that any other council member should be in the discussion. It is our protocol of our Institute, only the President go to the media. I will not be able to continue. If there are other people, its ok but from my own council, I can not. I can not break the rules as a President, other colleague may break the rules and regulations, I can not break as a President. Let other people take the enjoyment on a media level, I cannot. DD Rathi is there I have no problem. He is an outsider; I have no problem but two gentlemen are already in my council. Talati is my good friend, he knows everything. He will give you whatever you want, he is an expert. But on the screen we cannot sit together that is our protocol of the Institute. I am not participating. “
Anchor: Mr OP Vaish then little angered by the comments Mr Agarwal made and not wanting to be part of any controversy also stood up and left just seconds before we started this discussion. Unfortunately the two of them are not here. Mr Agarwal, I was hoping would defend his institute against the many allegations I have. But he is not here to do that, that task now falls upon DD Rathi and Sunil Talati.
Here is a verbatim transcript of an exclusive interview with DD Rathi and Sunil Talati on CNBC-TV18. Also watch the accompanying video.
Q: It has been a really difficult year for the ICAI. What is going on?
Rathi: I take Satyam and Booth capturing as one-off incidence. I am not worried that Satyam happened because not a matter of merely the institute. It is a question of very well organised fraud.
Q: There are symptoms of the malaise that has afflicted ICAI. The inability to redress these situations and the fact that the system has become so political, you now have Booth capturing. This sounds like a political election?
Rathi: Really speaking Satyam fraud institute or no institute, I do not think it could have been avoided. CAs and auditors are not meant for detecting these kinds of frauds. I am saying that when I am not a part of practising fraternity so I must have little more confidence in what I say. But they are one-off incidence. Similarly, booth capturing, it maybe stupid act of one stupid individual, it cannot tarnish the image of great organisation like Institute of CA. But I see more and more challenges coming in FY11, when you will see lot of new regulations coming in like new accounting standards like International Financial Reporting Standards (IFRS).
Q: Is the ICAI equipped to deal with all of that?
Rathi: I think you are better person to respond to that question. But I am a CA with almost over 40 years of experience may not be in practise but of course in the industry and I strongly believe that what a little I could achieve is because of my qualification as a CA and as a member of the institute. I am very much attached to this profession but like anyone else I also feel sorry not because of these two incidence, which took place but a constantly lowering standard of the institute.
Q: Some candidates spent sums of as high as Rs 1 crore in election canvassing or campaigning. What is this, is this crisis of leadership, has this system become so political that we need to re-invent this system of appointing council members? What is going wrong?
Talati: I would put it as a mixed bag. These are aberrations, either you take Satyam or the last instance of Booth Capturing. Institute or any fraternity of chartered accountants should not be blamed for Satyam, it is a total failure of corporate governance and nobody is answering that. We have immediately taken action on that member and got him removed from all the committees. The disciplinary proceedings have started. There is a system which we have to follow, that is going on and not only media and the whole fraternity and citizens of India know that strict action will be taken.
Q: In annual report, there are almost three pages devoted to the yoga camp and to the orientation camp held this year and one small paragraph devoted to Satyam. If this is the importance in your annual report of what is one of the biggest incidents of fraud in corporate India and the way ICAI is dealing with it, this is a very sorry way of redressing this system?
Talati: I appreciate that and that what is the President’s purgative. One particular leader or leadership may or may act in a particular way.
Q: Are you saying it’s a crisis of leadership in this specific instance and not a systemic issue?
Talati: I would say this is a joint responsibility of the entire council.
Q: I have a set of questions that I was going to put to the President of the council. I have spoken to dozens of members of the council and CAs in the last three days and the allegations I hear against the President range from trivia, to absurd to very serious. For instance he asked for the President’s photograph to be put up in every branch Chairman and regional council Chairman’s office and this was put out by a circular. He made a public comment about ICICI’s Bank audit regarding mortgage situations, which was then retracted. A decanting note that came out then from the ICAI against the NACAS’s decision on Forex accounting, that was a serious descanting note because all of corporate India was confused is to why ICAI was taking a contrasting position to what NACAS had put out. I am told that the President and VP are at such loggerheads that they don’t talk to each other any more, just evidence of politics that has entered this institute. I am also told that lakhs of rupees were spent in this jubilee year on yoga camp and a cricket match and like I pointed out all we know of the Satyam report is that it is yet to reach fruition that is one small paragraph?
Talati: The issue of spending lakhs of rupees is one issue and let us not go into a family dispute that arises within the family. The question is of good governance. What is good governance? We have the healthiest of the tradition that council on the fist day gives majority of the powers to the President. In good faith these resolutions are passed and powers are wasted with the President. If one or more presidents are not coming up to the expectations of the fraternity or the council as you pointed out. But that is all in this year 2009 and we are here to correct all those.
Q: So you are saying these problems are only pertinent to this year 2009, this loss of quality only happened this year?
Talati: I won’t put it as a loss of quality. This is a different approach, different attitude and different working style.
Q: Mr Rathi is saying about declining standards?
Q: Is that being followed?
Talati: I am really sorry to say but yes it is not being followed the way public perception is there.
Q: One more question about government nominees. There are eight on the council and they are meant to be there for an oversight, they barely even attend meetings and when they do that is for about 15-20 minutes. They are too busy with their jobs to be able to pay attention. Mr OP Vaish had admitted that to me on phone one day saying that the problem is we are not getting the participation that we need from government nominees and so there is no oversight, do you agree?
Talati: Yes and all of them are not in a position to attend fully and that is where the issue has to be addressed by them more than by us. When they are appointed with good faith by government it is their primary duty to attend.
Q: The next point that I am going to come to is the fact that there is just too much conflict in this entire situation. Would you be comfortable if Securities and Exchange Board of India (SEBI) was run by a broker? If the Chairperson of SEBI was a broker and not Mr Bhave or Mr Damodaran has been the instances in the past, where they are actually public service officials, officials appointed by the government. Would you have that much confidence in SEBI if it was run by a broker? If not which I suspect your answer is going to be Mr Rathi then why should we have confidence in a regulator that is run by the very same fraternity members that it proposes to regulate – Chartered Accountants?
Rathi: The system has worked even before I was born. From that day the system is working or maybe just about the time I was born. Fifty nine years of working, few years of not working up to that standard that doesn’t mean the system is bad. But yes there are key issues, which need to be addressed. Let me clarify, I do not endorse or deny what you said in your opening statement. But I would say if true and I repeat the word ‘if true’ then it is a very sad situation. But I do not know whether it is true or not.
Q: What the booth capturing?
Rathi: Not the booth capturing. The expenses you read out.
Talati: What I am trying to say is if you are focusing only on 2009 events and ignoring what has happened from 1949 to 2008 – it’s highly unfortunate.
Q: How are we concerned with the quality of regulation 15 years ago?
Talati: There is no question of conflict of interest. Chartered accountants are the best people to govern this and the time has proved; the regulators, the challenges have proved.
Q: Would you be confident in a SEBI that is run by a broker?
Q: Would you be confident in a SEBI that is run by a broker?
Talati: It is not a question of what SEBI is doing.
Q: Would you be confident in a market regulator that is run by one of the market participants?
Talati: If a perfect, valid gentleman is a broker and is head of SEBI, I would have not even slightest of the objection. That’s what has been happening all throughout an institute. Best of the professionals from the country are representing the institute.
Rathi: Let us turn it to a more productive side. Whichever maybe the system xyz, ultimately it all boils down to a question of good governance, best ethics and right people being in the place. Merely if you think that you change the regulator and everything will be set right, I will differ with you very respectfully. I feel sad that institute who is in power in my opinion in any case is drastically curtailed. They are not the only one who set accounting standards, they are not the only one who set auditing standards. They have participation but their role is getting diluted and it doesn’t make me happy. The fault could of the institute of council members or somebody else.
Q: Whose fault is then? What is the problem there, if the problem is not conflict what is the problem?
Rathi: What is a council; the members are not the only constituents. Firstly, you have the council members who are to be elected. I think there has to be a quality of a council member.
Q: It was a question I was going to put to Mr Uttam Prakash Agrawal, I am going to now put it to you all.
Rathi: I am not a substitute.
Q: You brought up quality of the professional. CB Bhave, M Damodaran, look at the Insurance Regulatory and Development Authority (IRDA) regulators, they all have long track records of public service, government service all of that. What is the track record of any kind of regulatory service that any of these ICAI Presidents have? They are just practising chartered accountants. In fact the term of one year Vice President and one year is President means that they all very know before they become Vice President and President that they have only two years in a regulatory position, post which they are going to go back to private practise. I am told by many council members included that much of their time is spend furthering their own private interest because they are going to go back to private practise?
Talati: I would just not tolerate this remark. Let me clarify very clearly most of the council member elected are sacrificing their family life, they are sacrificing their professional practise. I am the sufferer; I know how much I have suffered. You are sighting exceptions as a set standard. Let me tell you in journalism – we have yellow journalism, all TV or all media are not bad. So, one particular person or group of people doing something not to the satisfaction of many cannot be blamed on the institution as a whole.
Rathi: How do you improve the quality of council? As I mention one is the council member itself – it has to be a high quality. One of the qualities of course rightly or wrongly has to be popular among the members because he gets elected, he doesn’t get selected. If you add a selection process then all rank holders will automatically become the council members. But let’s recognise that after all individuals set the standards, individual set the rules.
Q: Do we have quality members according to you right now? What do we need to do to ensure we have quality members?
Rathi: We could make the judgement but let me tell you how we can improve the process. Secondly, let us not spare the Electoral College itself. I cited to you one famous quote that “Citizens of the country get the type of government they deserve”. Similarly, the CA members will get the type of council members they deserve.
Talati: I very much appreciate.
Q: But why should India Inc or why should the investing community suffer the consequences of poor electoral choices of chartered accountants?
Talati: Let me say in a happy note that elections have been just over and fraternity this time have been conscious.
Talati: I would say that yes institute is the appropriate and perfect body. Council election and election of Vice President is time tested, repeatedly discussed and decided in council 10 times, in my nine year tenure and we all feel that this system is fine. If at sometime, some people or some good governance is missing it is right time to be awakening.
Regards,
CA. Akshat
Learn With Fun
+91 9974491677
CA. Akshat
Learn With Fun
+91 9974491677
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