Accounting Bodies or Cartels - Competiton Act India

13 July 2009 |

I was reading the provisions and objectives of the Competition Act 2002 and then relating it with how accountancy is regulated in India by Acts of Parliament like ICAI Act, ICWAI Act and ICSI Act.


An Act to provide, keeping in view of the economic development of the country, for the establishment of a Commission to prevent practices having adverse effect on competition, to promote and sustain competition in markets, to protect the interests of consumers and to ensure freedom of trade carried on by other participants in markets, in India, and for matters connected therewith or incidental thereto.

(c) "cartel" includes an association of producers, sellers, distributors, traders or service providers who, by agreement amongst themselves, limit, control or attempt to control the production, distribution, sale or price of, or, trade in goods or provision of services;

(f) "consumer" means any person who—

(ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first-mentioned person whether such hiring or availing of services is for any commercial purpose or for personal use;

(m) "practice" includes any practice relating to the carrying on of any trade by a person or an enterprise;

u) "service" means service of any description which is made available to potential users and includes the provision of services in connection with business of any industrial or commercial matters such as banking, communication, education, financing, insurance, chit funds, real estate,transport, storage, material treatment, processing, supply of electrical or other energy, boarding, lodging, entertainment, amusement, construction, repair, conveying of news or information and advertising;


Will ICAI, ICWAI and ICSI Act, fall under the definition of cartel ?

ICAI Act: The institute of Chartered Accountants of India is a statutory body established under Chartered Accountants, 1949 for regulation of profession of Chartered Accountants in India. ( ICAI Website).

ICWAI Act: An Act to make provision for the regulation of the profession of cost and works accountants. BE it enacted by Parliament in the Tenth Year of the Republic of India. See ICWAI website.
The scope of the accountants under the respective act is defined in Clause 2 of Section 2 of their respective Acts. Moreover the council of the institutes issue notification to their members for recommended minimum fees to be charged.

1. As per provision of clause 2 of Section 2 of the Chartered Accountants Act 1949, reproduced below--
“A member of the Institute shall be deemed “to be in practice”, when individually or in partnership with chartered accountants [in practice], he, in consideration of remuneration received or to be received—
(i) engages himself in the practice of accountancy; or
(ii) offers to perform or performs services involving the auditing or verification of financial transactions, books, accounts or records, or the preparation, verification or certification of financial accounting and related statements or holds himself out to the public as an accountant; or
(iii) renders professional services or assistance in or about matters of principle or detail relating to accounting procedure or the recording, presentation or certification of financial facts or data; or]
(iv) renders such other services as, in the opinion of the Council, are or may be rendered by a chartered accountant [in practice]; and the words “to be in practice” with their grammatical variations and cognate expressions shall be construed accordingly.”


And

As per provision of Section 2 of the Cost and Works accountants Act 1959, reproduced below—
“Save as otherwise provided in this Act, a member of the Institute shall be deemed “to be in practice” when, individually or in partnership with one or more members of the Institute in practice, he, in consideration of remuneration received or to be received
(i) engages himself in the practice of cost and works accountancy; or
(ii) offers to perform or performs services involving the costing or pricing of goods or service or the preparation, verification or certification of cost accounting and related statements or holds himself out to the public as a cost accountant in practice; or
(iii) renders professional services or assistance in or about matter of principle or details relating to cost accounting procedure or the recording, presentation or certification of costing facts or date; and interpretation thereof or,
(iv) renders such other services as, in the opinion of the Council, are or may be rendered by a cost accountant in practice;
and the words “to be in practice”, with their grammatical variations and cognate expressions, shall be construed accordingly.”

Members of the respective institutes have defined areas of practice vide the provisions of the respective Acts under the administration of the Ministry of Corporate Affairs

Recommended Fees


See ICAI website for Revision of Recommended scale of fee chargeable for the work done by the members of the Institute. Other guidelines on ICAI website.

In a competitive environment, you can fix Maximum Retail Price and producers are free to charge price less than MRP. However it is not the case with Accounting bodies in India where they have published the minimum fees to be charged and members are bound by the notification from their respective body.

 

The other objective of the Competition Act is "to ensure freedom of trade carried on by other participants in markets, in India".

 

Accountancy is regulated in almost all the developed countries and India is no exception. Most of the rules in India are derived from the UK or best the practices across the world. UK also a Competition Commission

 

The Accounting Framework is more developed in the UK so that no single body has an influence on the Accountancy profession. The public/consumers have a choice of availing services from any 6 accounting bodies. Moreover they can practise accountancy by being member of any of the accounting body. In India, there are only two accounting bodies and their role are mutually exclusive (more or less).

The Accounting Standards are set by an independent board, ASB, in the UK. In India, the accounting standards are recommended by ICAI and then approved by NACAS. So ICAI calls the shots in all the aspects of Accounting. Moreover Press notification No. 1/5/2001-CL.V dt 13th May, 2008 from Ministry of Corporate Affairssubscribes to the view that not enough have done for checks and balance of regulation of accountancy profession in India. ICAI took the task of framing accounting standards and the Companies Act was amended in 1999 to provide a statutory backing.
and Indian Competition Act has been drawn in similar lines as the UK.
2. The work of formulating down accounting standards for the companies operating in India was initiated when the Institute of Chartered Accountants of India (ICAI), a statutory body regulating the accounting profession in the country, first took up this task in 1977. However, the accounting standards prepared and issued by the ICAI were mandatory only for its members, who, while discharging their audit function, were required to examine whether the said standards of accounting were complied with. With the amendment of the Companies Act, 1956 through the Companies (Amendment) Act, 1999, accounting standards as well as the manner in which they were to be prescribed, were provided a statutory backing.


Competition Act 2007 is a recent addition of rules to protect the interest of consumers and public in India. In the UK, the accounting profession is regulated and no single accounting body can influence the profession. However with the advent of Competition Act in India, the acts enacted earlier needs to be relooked or else they would fall under "Cartel" by definition under Competition Act. Having two accounting bodies with mutual exclusive objectives is not in public interest in India as there is little or no competition within the meaning of the Competition Act.

 
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