The Concept of Excellence

Among at least five impeccable words, — ‘Outstrip’, ‘Outdo’, ‘Exceed’, ‘Surpass’, ‘Transcend’, — all of which mean to go beyond stated measure, degree, or implied limit, — Professions prefer the word ‘Excellence’ as their appellation, inter-alia because, unlike the above synonyms, which respectively may suggest merely competition, achievement, authority, superiority or rising above a limit, — ‘Excellence’ indicates a “preeminence in quality”, — which is what Chartered Accountants are all about, and this remains encapsulated in the inaugural speech by Hon. C.D. Deshmukh, the first Finance Minister of India, upon the formation of ICAI:

“This structure shall house all that is noble and dignified in the profession of Chartered Accountants.”

The Past: Surviving Shackles, License Raj & The Search for Relevance

Through the early decades, the finest minds upon graduation craved Articles, enchanted by the premium CA qualification. Some of the gems who trained during those years are today leaders of many sectors in India and abroad, too numerous to recount.

CAs rode the high tide of sought-after Tax expertise, following doomed attempts during the 60s & 70s by the business community to find cheer in the tax regime then extant under the FERA cum License Raj, except through the most abstruse tax planning, on a scale now hardly credible even to modern tax planners. Firms with quality to match today’s Multinationals, but squeezed by an oppressive tax regime, worked in rudimentary environments with non-existent creature comforts — the serene antithesis of the later-day CA offices modelled after five-star lounges.

The License Raj also required numerous attestations — there was a boom in what was referred in vernacular as “certificate work”. Agents scouted impecunious young CAs even deep into the Moffusil to obtain ‘certifications’ of end users and consumptions of costly imports.

Extensions of Practice areas like Costing, Management Accounting & Financial Management had by the 70s been popularised. The concept of accounting had changed, from one of maintenance of books & tracking asset changes, to complex resource allocations & forward-looking measurements that support decisions for the efficient maximisation of profit. These specialisms were subsumed by Management Consultancy divisions in traditional CA offices, which flourished. A generous proportion of perceived “value added” domains moved away from the core Audit & Attest function. The big scramble in Audit was for empanelment, to win Audits of Nationalised Banks, Insurance companies & PSUs.

Fault lay not with the ICAI membership but in the stagnant economy, and archaic regulatory shackles, that offered little opportunity, except perhaps through emigration. Thousands went West, and as many gravitated to the Gulf. They did well, and did their country and calling proud.

ICAI Council invariably included the most competent & upright professionals. But in a closed economy, an unseemly proportion of time was drained on volumes of disciplinary cases punishing puny sins — no more than tiny ads, minor indirect solicitations, and acceptance of miniscule audits without prior NOCs, mainly by members struggling for the economic necessities of life. Whether large established wrongdoers, including CAs outside professional practices, were booked, remained an enigma.

Given the disability that an Auditor can neither issue summons, nor examine on oath, nor disclose on ground of confidentiality the most horrendous client sins except in a Court proceeding, Auditing is probably destined to veer towards forensic investigations. Some international firms have made commendable progress in this, even without formal Regulatory backing.

The Present: Solution Providers, Capital Markets & The New Order

Providentially, the accent on redistribution of work began to change towards an emphasis on creation of new work; ‘Tax Audit’ was a notable milestone in creation of new work. Curiously though, the more comprehending minds among the then Seniors were, at least initially, not enthused by this source of perennial new work — it was seen as too risky.

Before the blossoming of other specialisms, the absorption with taxation as a discipline was near total. When established CAs of that era crossed fifty years of age, it would not have been uncommon to see their interest in the finer points of fiscal interpretations sublimated to become the principal passion of existence, replacing all other zests. 1985 broke the tax spell and ushered in Financial Services which were already waiting in the wings to come centre stage.

The risks assumed by Financial Institutions in extending term loans soon brought forth a new breed of CAs to help borrowers satisfy the information needs of lenders. This work quickly extended to an appraisal of justifications for projects before committing funds. The ICAI published the Background Material on Project Evaluation in 1988, but well before that, entrepreneurs increasingly saw CAs as facilitators & procurers of much-needed finance, rather than number crunchers peering at small print while big-picture concerns went unnoticed. The evolution of a learned but backward-looking timid CA lot into a dynamic CA pack not lacking commercial nous became agreeably evident.

An important lesson the profession learnt was that sectors outside traditional audit, especially industry sector, would value as advisors those professionals who were providers of Solutions, not those who stopped short of a solution after finding the root of a problem, howsoever painstakingly researched that finding may be. For some of us brought up in the ‘Past’ mould, this may have been a bitter pill to swallow. But it is important to bear in mind in dealing with the ‘Present’ that, if the perceptions of society about us professionals do not coincide with our self-perception, then it is we professionals who become irrelevant, not society, nor those ‘Opinion Makers’ who hold the purse strings that generally influence the perceptions of society.

Be that as it may, in the ‘Present’ age under SEBI-sponsored arrangements (the ‘Past’ Controller of Capital having vanished), a number of adventurous souls from our CA Profession have had ample scope & recognition. This includes modern CFOs, many belonging to our own profession, who are adept at ‘selling’ Bankable Balance Sheets to Analysts & Investors, and presenting their Business plans to audiences from an ‘external perspective’, with an in-depth expertise in specialist areas like Risks, including Tax risks, Regulatory requirements, and structuring, which have become among the most rewarding areas of professional work.

“A New Order has now evolved in which Professional Services Organisations, some of whom are integral parts of international networks, endeavour to offer advice using a multidisciplinary business focused approach.”

To view the New Order as unwelcome would be an exercise in misinformation and prejudice. The change heralded much that was good and some of it exceptionally good:

• First of all, the New Order destroyed oligarchies that had existed earlier.
• Equality of opportunity is a principle far better served by the New Order in the first & second decade of the 21st century than was ever served during the preceding half century.
• Equally importantly, aspiring talented CAs unable to flourish their own practice can now join very large establishments more easily than they could ever have become part of erstwhile oligarchies.
• Besides, it is only the New Order that has made it possible for large numbers of CAs to receive pecuniary rewards far higher than those ever prevailing in the past.
• Moreover, under current dispensations, the large residue is annually shared locally with remarkable fairness and equity that contrasts favorably with the skewed slopes for profit sharing ordained in the past.

The Future: The Decennial Technological Disruption

It took the World of International Trade more than a century to move from the “cash basis” of accounting in the post-Renaissance era, to an “accrual system” in the Age of Exploration, and then on to ‘Mercantile Book-keeping’ in the Colonial period.

But it may now take less than a decade to render obsolete much of what we CAs know, as we move deeper into:

1. Data Analytics
2. Data Protection
3. Internet of Things (IoT)
4. Robotic Process Automation (RPA)
5. Blockchain
6. Artificial Intelligence (AI)
7. Cryptocurrency
8. Cybersecurity
9. Fintech Innovation

Bizarre as it may seem, competition for CAs in future decades may not be from rival callings, but more generally from inroads of connectivity driven by newer technologies into all sorts of adjacent competencies. This is not an alarmist foreboding, but an exhortation to examine how our roles will be recast, and our work modalities impacted, not only in respect of concerns and benefits, but for all agenda including TECHIE and HUMIE issues.

Mouse clicks already open countless doors to knowledge, Enterprise, and Commerce continents away, but what will shortly overtake us is: (i) global embrace of new-gadgetry, (ii) info-predators, (iii) electronic townhalls, and (iv) hi-tech shovels that drown us in the info-junk of a twenty-first century village marketplace exchanging information and services.

There is a relentless change in: (i) How we Work, (ii) How we Learn, (iii) How we remain Connected, and (iv) How we are Regulated — and How our voices, Appeals and Representations are heard.

International Taxation & The Digital Realm

Digitalisation of the Economy is bringing about a fundamental shift in the very basis of:

• Nexus & Pillar 1: Long-held principles of how “nexus” for taxing rights of each jurisdiction gets established are undergoing major changes based on work being undertaken as part of “Pillar 1” following OECD and G20 BEPS action plans.
• Virtual Permanent Establishment: Traditional definitions of “Permanent Establishment” are widening from being a largely physical concept to something virtual or digital.
• New Domestic Mechanisms: The introduction of “Significant Economic Presence” (SEP) into the Income-tax Act, as well as the earlier introduction of the “Equalization Levy”, are notable indicators of portends.

Cybersecurity: A Business Continuity Imperative

It is not improbable that Regulators, Employers, Insurers, and Hackers could claim intrusive access to our: (i) Bank accounts, (ii) Transaction files, (iii) Confidential documents, and (iv) Customer records.

“Markets have become increasingly reliant on interdependent technology systems, and the ‘Cyber Security’ risk looms even larger.”

Expanded far beyond the realm of IT, ‘Cyber Security’ has become a ‘business continuity’ necessity to ensure that Shareholder Value remains intact, along with privacy of Corporate Intellectual Property. Security of our assets in an emerging digital environment is foundational to how a corporate is viewed by capital markets, lenders and other stakeholders, with increasingly higher levels of Analytics & AI.

Exemplary oversight of Cyber Security Risk & Cyber Governance are fundamental to sound operations, inter-alia because, rarely does any failure happen in a vacuum. Thus, the threat of systemic disruption has taken on a menacing preponderance among the concerns of Regulators and Policymakers worldwide. Solutions need to match the pervasiveness of problems:

• Defences must improve when new vulnerabilities are discovered.
• Cyber Risks are rarely posed to a single network, but often to an entire ecosystem.
• Measures must be dynamic in collaborating with Law Enforcement.
• Information must be shared to help develop new technologies that prevent attacks.

Proactive preventive ‘Cybersecurity’ will necessitate skills on interface devices going far beyond mere trackballs, styluses, microphones, and cameras — extending in a few years into the realm of: (i) Special Glasses & Helmets tracking eye and head movements, (ii) 3D Videos, (iii) Tactile impression devices, and (iv) Bodynets linking devices in cars and homes.

Conclusion, The Skanda Purana Injunction & Info-Feudalism

In concluding this article, it may be sufficiently important to diverge from usual pleasantries, in order to underscore that, not just the Accounting profession, but almost all Businesses and related Ecosystems, may face future challenges beyond current pre-vision, that are both insidious and ubiquitous.

So, when things go wrong elsewhere, people look to the CA fraternity and the Institute as worthy repositories of all sorts of Information. Greater therefore is the lapse, if it occurs in the portals of the Institute or the offices of its Members. This aphorism is delectably captured in a couplet from the Skanda Purana:

Suffice it to say that as CAs, we seem headed to live and function in a Society that may loosely be described as Info-Feudalism — perhaps yet another oligarchy, comparable to the Feudal Age, comprising broadly two classes:

• A few INFO-BARONS
• Numerous WORKSTATION-SERFS

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Author may be reached at: eboard@icai.in