What are your thoughts on how the industry is navigating the increasing challenges and expectations, and what more can be done from stakeholders such as the CAs, regulatory bodies and companies?
Today, our country is experiencing more than 7 per cent growth. With a population of 1.4 billion, primarily comprising a young and tax-contributing demographic, India has already reached a $4 trillion economy.
Despite the positive steps taken by the government to improve ease of doing business, the business environment remains complex due to numerous laws. The introduction of the GST law aims to formalise the economy. Additionally, the Insolvency and Bankruptcy Code is designed to address situations where factory owners are unable to create value, allowing others to take over and utilise the resources more effectively. This is crucial in a country like India, where resources are limited, but talent is abundant.
The government's efforts to simplify laws and improve ease of doing business are evident, especially in the realm of startup funding, making India the third largest startup ecosystem in the world. However, there are still some issues with the GST law, causing compliance difficulties for businesses, which we are actively addressing.
Overall, the business environment is thriving, as reflected in the growth of the stock market, tax collections and economic growth rate. While there are challenges with certain tax and GST laws, we have been representing these concerns to the government. In the coming years, we anticipate that regulatory compliance will become less complex with the support of professionals and industry stakeholders and we are committed to working towards that goal.
Artificial intelligence (AI) integration, machine learning (ML) and other digital tools in auditing and accounting practices require CAs to continuously upgrade their skills. Cybersecurity risks associated with digital transformation necessitate robust measures to protect sensitive financial data. Are CAs in India equipping themselves enough on this? Any guidance for them?
Last year, we revised our syllabus to include essential subjects at the final level such as artificial intelligence, machine learning and Python. This demonstrates our commitment to embracing technology because it represents the future. We believe that the knowledge we've accumulated over the years may become irrelevant without incorporating these new technologies.
If you are not up-to-date with artificial intelligence, survival in the field will be challenging. AI will not replace professionals, but those proficient in AI will replace those who are not.
We firmly believe in adopting AI, which is why our institute has formed a new committee called 'AI in ICIA'. This year, we have created this committee to integrate AI within our organisation.
In this committee, we cater to our 9 lakh students by providing study materials, suggested answers and RTPs through a new tool called ICIA GPT. We are launching this tool today with the minister's support. This tool allows students to quickly access information such as the frequency of a specific question over the past 75 years or details about Section 148 of the Income Tax Act.
We are providing this tool to all 9 lakh students free of cost. Similarly, for our members, we have developed a tool that includes data from 7,000 listed companies and 17,00,000 unlisted companies. Members can use this tool to quickly find qualifications in audit reports or any other relevant information. This tool will also be free for all 4,00,000 members.
By adopting AI, we are updating our members to ensure they remain relevant. AI will assist but not replace professionals. Our interpersonal skills and advisory roles cannot be replicated by machines. AI will serve as an assistant, answering queries and aiding in tasks like reviewing extensive reports.
Looking ahead, we envision audit reports being converted into audio and video formats. This approach will cater to small investors who may prefer listening or watching over reading lengthy documents. AI will translate these reports into local languages, making them accessible to a broader audience. This technological advancement will be a game-changer in the business spectrum.
We are committed to embracing AI and helping our members use it as an assistant. We believe that by adopting AI, professionals will find greater success.
As businesses become more global, CAs need to navigate and comply with international accounting standards such as IFRS and US GAAP. The need for harmonisation of global accounting standards and practices remains critical. Any advice on this for peers and younger CAs?
The Institute of Chartered Accountants of India (ICAI) has adopted the International Financial Reporting Standards (IFRS) with certain reservations. IFRS, an international standard for financial reporting, has been adopted by many countries. ICAI adopted these standards in 2015.
Regarding sustainability standards, the IFRS Foundation has introduced two new standards, S1 and S2. Additionally, the Securities and Exchange Board of India (SEBI) has mandated the Business Responsibility and Sustainability Reporting (BRSR) standards for the top 1,000 listed companies. We are aligning these standards with global parameters, ensuring our practices meet international benchmarks.
Globally, the best practices are integrated into our system and our balance sheets are prepared accordingly. While we have not fully adopted IFRS, we are continuously reviewing and aligning our standards with global perspectives. As India aims to become a developed country and the third-largest economy by 2047, it is crucial for our financial reporting to be globally aligned.
For young chartered accountants, it is vital to learn about sustainability reporting. The European Union, for instance, requires products to be certified for sustainability reporting. Similarly, RBI and SEBI have issued guidelines related to carbon emissions, impacting industry credits based on emission levels. Financial and non-financial reporting must be incorporated into company reports and young professionals need to adapt to these developments.
We are making our members aware through certificate courses, seminars, conferences and study materials. Sustainability reporting is the future and we must adopt it.
Ethics is another critical area. Our final syllabus includes mandatory courses on ethics and technology. Last year, we revised the syllabus to include these aspects, emphasising that without ethics, one cannot survive in the industry.
ICAI has an Ethical Standards Board and a comprehensive code of ethics, which members must follow. We address various ethical threats like independence, excellence, sustainability and advocacy. Our code of ethics is more stringent than those of other accounting bodies worldwide. For example, our members are not allowed to advertise, unlike in other countries. We believe that even if something is legal, it must also be ethical.
Our commitment to ethics is strong and we continually revise our code of conduct to maintain global competitiveness. We are proud to be more ethical than other accounting bodies and we instil these values in our students and members through various platforms.
How does ICAI simplify financial terms like tax slabs to the large mass and extend the scope of financial literacy?
Today, India has a financial literacy rate of 27 per cent, with only 16 per cent among students. This level of financial literacy is a cause of concern. If India aims to become a developed nation by 2047, this 27 per cent needs to increase to 87 per cent. This is the current state of financial and tax literacy in our country.
Three years ago, our committee at ICAI initiated a financial and tax literacy drive. We're focused on educating the public about basic financial concepts such as income tax, budgeting, savings, bank accounts, investments and mutual funds. This effort is not limited to our members; it targets the general public.
We offer these educational programmes free of charge, across all 175 branches and 355 chapters. These programmes are available in 12 regional languages, ensuring wide accessibility. We provide educational materials and organise seminars and conferences to reach as many people as possible.
However, our efforts are still not enough. Educating the masses about financial basics is a social obligation. Financial and tax literacy is critical and the government is also involved in skill-building initiatives. More needs to be done, but we are committed to contributing significantly.
Another development I want to share is related to the Panchayati Raj institutions. India has 260,000 panchayats, which face challenges in finding qualified accountants. To address this, we have signed an MOU with the Comptroller and Auditor General (CAG) of India. We offer a four-month online course for students who have completed their plus two exams. After passing a test and completing the course, these students are certified as municipal and panchayat accountants by both ICAI and CAG.
This initiative allows panchayats and municipal bodies to hire these trained accountants, promoting financial discipline. The entire course costs only Rs 500 and ICAI covers the remaining costs. This collaboration includes the Ministry of Panchayati Raj, CAG and ICAI. So far, 600 students have passed the course and are employed as municipal and panchayat accountants, earning between 30,000 to 40,000 rupees per month.
This initiative not only addresses the need for qualified accountants but also creates job opportunities.
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