Decoding The Financial Implications Of Growth

The role of CAs is said to be much more specialised today. What are the skillsets required for CAs to remain relevant?
When the profession started, it was about auditing and accounting with some amount of taxation and so on. And now, like all other fields, it has indeed become very specialised. Practices-specific CAs are emerging who are focussing on the likes of digital forensics or GST or indirect and direct taxation. CAs have become people who guide the business and what should be the next level. 

Every field within chartered accountancy has a specialisation. However senior you are, you have to improve your skill sets all the time and take certain exams. I’ve done the same as well. There are exams for the likes of system and security audits, concurrent audits, valuations and various such. There are courses and curricula to enhance these knowledge skills. Then there are seminars as well, for example for branch audits and central statutory audits. This hybrid of seminars and courses put the whole thing in a different zone. As we move forward, these skills are being prescribed by the people who are registering us and want our services.

There are many changes in the regulatory environment as well, which seem to be leaning towards preventive measures. What are some of the changes you are seeing in this?
The regulatory environment is very challenging nowadays. In the last few years, many regulations have come into play from regulatory bodies like the TRAI, SEBI, IRDAI, RBI, RERA and others. As regulatory requirements become high, compliance is important. With technology and artificial intelligence (AI), we can take this up a notch. Take the example of fraud prevention. CAs would mechanically do their work based on the true and fair balance sheet, but with AI, they can deep dive into many things which helps us in fraud prevention. 

Another example is in the banking system. The statutory auditors play a very big role in fraud prevention because the systems and controls, which are also reflected in the IFC (internal financials control) code, also reflect internal control and weaknesses. We assess all this and give it to the management and the board so they can assess the risk areas and address them. This is a very important area that is coming up now.

The role of CAs seems to also be innate in ESG (environment, social, governance) as well, especially in governance where some of these are factored in. How are you seeing this change over time?
ESG is a good concept, and accounting will be important because every company will be rated based on ESG. There are financial implications for each one of the three pillars. At this point, we're just following ESG with a general perception of sustainability. But we'll have to collaborate and transform it into financial terms. After all, everything should be financially viable. You cannot pursue ESG without this because people don’t have unlimited funds. How they make money out of it is equally significant. The most noteworthy thing here is how to translate this into financial terms, outlining the benefits and guiding how to take it forward. This is not going to be easy and it requires many skill sets I’ve mentioned.

What is your advice to CAs and practitioners on emerging sectors or areas?
At present, many chartered accountants look at how to do projections or business models. In the startup space, many promoters have the idea and are technically well-equipped, but they do not have the business or financial know-how. This is an area to pay attention to because CAs can supplement or augment people without knowledge. The well-established industries have internal people, where the CAs are employed and have the resources. The grey area is where there are private equity funds, startups and investors. That is the area where they ask CAs what business models they have and whether they can sustain growth. Because at the end of the day, it's capital that drives the business. It's not only about selling an idea, but so much more than that.

I have been advocating all along about shareholder agreements. When somebody starts an enterprise, they loosely start it without a clear arrangement between the partners. We have seen many who have buckled under interpersonal issues and rivalry among themselves or are not clear of the future. Role definition and putting the right shareholder agreement become the foundation for anyone to move forward. It can also be about setting up shop in India or engaging in cross-border transactions. People must know the rules and regulations. CAs can play a major role in this. They become the directional people who can guide entrepreneurs and business people the right way.

You mentioned partner fallout. We have also seen recent examples of corporate governance failures. How can the auditing process or the way that it is done be improved to change some of this?
There has to be better engagement between the auditor and the auditee. An audit should not become mechanical. Right now, we see the auditor and auditee treat it as a yearend exercise. It has to be a serious engagement, which should be at the highest level. Auditees should accept suggestions and warnings instead of brushing them aside. That is the key to success. When an auditor points out a weakness in systems and controls, even if it is a small thing, it should be an imperative duty to take notice. The two should work closely and see that these are taken seriously.

Auditors also must not take it as an impediment or routine. It cannot be casual. People have to accept the suggestions and debate on them. The dialogue between the auditor and auditee is a must. The mindset has to change. People should accept this as a preventive step or as a step of right guidance, rather than taking it as an annual exercise from a foreign body. 

It also has to be more remunerative. If you look at costs, both technology with AI and human resources have increased. The benchmarking will have to change if you want to get good audits and good auditors. Every firm will have to relook at themselves, whether they seriously want to pay their auditors well and take the best out of them. Startups can’t pay much, and that is where the risk is. People give very limited time to them. They want to get the cheapest auditor and tick the box rather than getting an audit done. There is a real challenge here.

At the 75th CA Day, any advice to the young and aspiring new CAs?
They must embrace technology. That is the frontrunner in everything. For example, digital forensics. White-collar crimes are increasing and the clients also require a lot of depth in this area. Technology and AI tools have become very important. The CA curriculum includes all this but the new breed of people should equip themselves better as they move forward. There are also shared tools that can help them reduce costs. Sometimes, a practising person may not have the necessary capital to invest in everything, so they should consider this route as well. The work is moving in a very different direction. Human intervention may slowly come down. More and more tools are going to be used as we move forward.

And what are the opportunities that you see for chartered accountants in the future?
Opportunities are aplenty. Many new sectors have opened up. Earlier it was just manufacturing and a few large sectors. Now, there is agri, cryptocurrency, insurance, banking, mutual funds and many more emerging. And each has a separate set of regulations and compliances. Then there are constant developments in the regulatory environment and the emergence of cross-border transactions and so on which too open new doors. There are also new fields such as digital forensics coming up.

For several reasons, chartered accountants have been reluctant to do anything in a major way in recent years. This is another opportunity that practising chartered accountants have. This is the time when people must invest in knowledge and their own set of people. 

We have to prepare only by knowledge and see where we are moving, and how we get into these new spaces. It will be very important to understand what we can specialise in and deliver better than others.